Majestic Murban: the significance of the UAE crude oil presented to Donald Trump

“The highest quality oil there is on the planet,” as US President Donald Trump called it. “A globally-recognised benchmark”, as Adnoc Managing Director and Group Chief Executive Dr Sultan Al Jaber described it. Mr Trump had just been presented with a small bottle of Murban , the UAE’s leading crude oil grade, during his visit to Abu Dhabi. What is Murban , and why does it matter? The story goes back to 1953. The first well drilled in the UAE, in a remote part of the Abu Dhabi desert, found traces of oil . But poisonous hydrogen sulphide gas escaping from a ruptured pipe killed two workers, and deterred further exploration there. Instead, the first big discovery was made offshore, at Umm Shaif, in 1958. A follow-up well, Murban-2, was drilled the same year, without success, but Murban-3, in May 1960, unearthed a major field. Though the field is now known as Bab, the well gives its name to the crude grade found there. Abu Dhabi launched into its oil boom, and the national journey which would form the UAE 11 years later. Oil is not all “black gold” - it comes in a wide range of varieties. Heavy dark Venezuelan crude is so sticky, it will not flow out of an upturned bottle after hours. Oil from the Bakken shale formation of North Dakota is green, looking like lemon and mint juice. Some light oils are clear as water. Murban is usually a darkish brown. It is not just a matter of aesthetics. Heavy – that is, more dense - crude oils were traditionally less valuable, as they are more viscous and harder to refine. They yield higher quantities of less valuable fuel oil, and less of the light products such as petrol and kerosene. A heavy oil would have an API gravity – the scale used for crude density – of 15 or less. A crude with API below 10 will sink, not float, in water. Heavy oils are also typically “sour” – with a higher content of sulphur, which has to be removed during refining. High-sulphur fuels are now banned in most countries for vehicles and ships because burning them produces polluting sulphur dioxide, a cause of acid rain. A very light crude would have an API up to about 50. Murban is a light crude , with an API gravity of 40, lighter than the European benchmark, Brent, or the US’s West Texas Intermediate. It has a somewhat higher sulphur content though, of 0.7 per cent, Middle East crudes usually being quite sulphurous. Out of the UAE’s production of about three million barrels per day currently, about two million bpd is the Murban grade. This makes it the lightest crude oil produced in quantity in the region. Kuwait, Qatar and Saudi Arabia produce moderate amounts of similar or lighter oils, but their main production is heavier. Russia’s main grades are also heavier and higher in sulphur. Murban’s export route is also highly strategic: three-quarters of it goes by pipeline to Fujairah for loading, enabling tankers to avoid entering the Gulf, and giving insurance in case of any interruptions to transit through the Strait of Hormuz. From March 2021, Murban became freely traded on the ICE Futures Abu Dhabi (Ifad) exchange. This achieved a record level of trading in January. The intention is to establish Murban as a benchmark for crude sales in Asia. This was a rare move for the Gulf national oil companies which, other than in Oman, retain a tight grip over who can buy their crude and where it can go. Until then, most Asian crude oil sales were priced by reference either to Brent, produced thousands of kilometres away and in declining quantities, or Dubai-Oman. Dubai-Oman is traded on the Gulf Mercantile Exchange (GME) based in Dubai, which has established itself well. Its heavier, sour crude and Murban are complements. Adnoc has also considered launching a futures contract based on Upper Zakum, its main offshore grade, a heavier, sourer crude than Murban. At the end of 2023, Adnoc finishing upgrading its Ruwais refinery so it could run on crudes of different quantities. This was intended to free up more Murban for export. Supply of Murban will expand further as Adnoc’s production expansion continues, and as Opec+ restrictions gradually ease during this year and next. These factors make Murban particularly important for Asian refiners . Of the nearly 1.4 million barrels per day of Murban exported last year, Japan, Thailand, India, China, South Korea and Singapore took 1.2 million bpd between them. Asia is, in turn, by far the world’s biggest oil market, and the one large importing region still showing robust demand growth. So, on its 65th anniversary, what next for Murban? A paper just published by Bassam Fattouh and Ahmed Mehdi of the Oxford Institute for Energy Studies points to some trends. Methods for oil pricing in Asia, traditionally very conservative, are being transformed by “futurisation" – the growing importance of Ifad and GME, and the wider use of their pricing by other major sellers. Some unusual market features have at times caused Murban prices to fall below those of Upper Zakum and Oman, even though Murban would generally be considered the higher-quality crude. The UAE is set to increase production capacity more than any other Opec+ country, bar Iraq, over the next few years. About half of the increase comes from the Murban-producing onshore fields. This brownish liquid, a gift fit for a prince or a president, has been a nation-builder. Its importance, to the UAE and to Asian energy consumers, will keep growing. And there is plenty more Adnoc can do to capitalise on Murban’s rare combination of vast quantity and vintage quality.