Could a Middle Eastern Oil Benchmark Compete with Brent and WTI?

Two years ago, the West Texas Intermediate (WTI) joined Brent as the most traded and most liquid oil contract globally, a significant milestone in oil trading. While the market continues to evolve, experts speculate that a Middle Eastern oil blend could eventually rival Brent, but this remains a distant possibility.

Energy Intelligence's Adi Imsirovic recently suggested that some Middle Eastern oil producers may be on a path to create a local benchmark, supported by regional exchanges like the Abu Dhabi exchange. The UAE, in particular, may even decide to leave OPEC in the future, given its ambitions to increase oil production from 4.5 million to 5 million barrels per day.

However, for the Middle East to establish its own global benchmark, there are several hurdles to overcome. For example, the Dubai benchmark, which consists of just four crudes, does not have enough variety to compete with Brent's five constituent grades. Additionally, the political challenges of involving both Saudi and Iranian crude in a potential benchmark make this idea highly complicated.

Despite these obstacles, the idea of a unified Middle Eastern benchmark, pooling oil from major producers, could someday gain traction. But for now, it's a long-term vision dependent on overcoming both logistical and political barriers.

Meanwhile, crude oil prices are seeing upward momentum, driven by OPEC's production cuts and strong U.S. economic data. As of now, Brent crude is trading at $77.34 per barrel, while WTI stands at $74.65 per barrel.