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UAE Supply Cut Prompts Murban Derivatives Losses for Oil Majors
A decision by Abu Dhabi National Oil Company to slash July shipments of its flagship Murban crude has led to significant trading losses for equity partners hedging their positions, with estimates reaching $12 per barrel. The move stunned major stakeholders, including BP Plc and TotalEnergies SE, forcing abrupt reshuffling in the derivatives market and weighing on profitability metrics.
The volume cut, amounting to approximately 3–4 million barrels or around two days of production, was effected unevenly across equity holders—reducing cargoes by between 5% and 40%, according to industry sources. Term buyers under long-term contracts were reportedly unaffected, indicating a strategic move to preserve foundation relationships while squeezing discretionary volumes.
This has created a hedging mismatch: partners had positioned in futures and options to offset anticipated Murban deliveries, but actual supply fell short. The result: mounting mark‑to‑market losses on paper positions, with some market estimates as high as $12 per barrel—a steep decline considering thin typical margins.
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Murban crude, trading via ICE Futures Abu Dhabi since March, has been gaining prominence as a Middle East light crude benchmark. However, the recent cut has triggered volatility in its futures market. While spot premiums had previously eased due to ample supply and rising output post-OPEC+ easing, this supply setback has reversed some of that trend.
The background to the decision lies in ADNOC's broader strategic recalibration. In late May, the company downgraded its projected Murban export capacity from 1.76 mb/d to 1.61 mb/d through May 2026—choosing to retain more crude for refining and domestic consumption. Analysts suggest this could reflect a drive to optimise margins via Ruwais refinery integration, as well as to better balance global market positioning.
Market reaction was swift. Murban spot premiums fell to six‑month lows in Asia, even as export levels surged earlier this year in a bid to undercut competing heavier Middle Eastern grades. Yet the supply curtailment prior to July led to retreating premiums and amplified uncertainty among refiners and traders.
BP and TotalEnergies, two of the most significant equity partners, have reportedly taken the hardest hit. With pre‑hedged positions now misaligned to actual cargoes, both companies face pressure to unwind derivatives, likely at a loss. Platts estimates suggest losses could total up to $12 per barrel—potentially eroding tens of millions of dollars in trading gains.
These developments underscore the evolving risk profile of Murban as a benchmark. Its growing adoption, underscored by record trading volumes on exchanges such as ICE and Platts MoC, has attracted global attention. Yet supply-side control remains firmly in ADNOC's hands—a stark contrast to more decentralized benchmarks like Brent or WTI—raising questions about market predictability.
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The scenario highlights divergent strategies among Murban's partners: equity holders dependent on predictable allocations, versus term buyers whose contractual priority provides insulation from short-term supply shifts. It also accentuates the complexities that major oil trading desks face when aligning physical logistics with financial hedging.
Analysts are cautioning that such volatility may influence future demand for Murban derivatives. Omar Najia of BB Energy has previously noted that futures liquidity depends heavily on consistent physical volumes; erratic supply cuts could impede long-term development of a robust trading framework.
ADNOC, for its part, has yet to publicly comment on the allocation adjustments for July cargoes. The lack of transparency is typical of the company's market posture, rooted in a strategy that increasingly blends output management with integrated downstream optimisation.
Market observers are now eyeing two key developments: first, how quickly ADNOC will restore shipments to original estimates; second, how equity partners will recalibrate hedging approaches to accommodate supply-phase volatility.
The shock to trading positions could also spark a reassessment of Murban's maturity as a benchmark. While its rise has been meteoric—becoming the cheapest medium-sour crude in key Asian benchmarks earlier this year, prompting record cargo allocations via Platts MoC —the latest contraction exposes vulnerabilities inherent in single-provider control.
Equity partners are said to be preparing for tighter cooperation and improved supply forecasting. Speculators suggest that future terms may include contractual safeguards or compensation clauses to protect those hedging against supply deficits.
This episode marks a defining moment for Murban's financial architecture. Traders and refiners will be watching closely to see whether this diversion is an isolated incident or the beginning of recurring supply-management interventions. Either way, it signals the growing pains of what aspires to be a global oil benchmark—one still subject to the strategic impulses of its originator.
