Environment

DME, the Middle East's premier international energy futures and commodities exchange, reported that its flagship Oman Crude Oil Futures Contract (DME Oman) contract sunk to a 26-month low with Thursday's settlement price the weakest since July 2012.

The front-month November DME Oman futures traded at a low of $95.98 per barrel before settling at $96.17/b at 12:30 Dubai time, with more than 4,526,000 barrels traded during the pricing window.

Thursday's price was $1.30 down from the previous day's settlement and represents a fall of over $15/b in less than three months. The lowest price of 2013 was $96.84/b on April 18. The DME Marker Price is used by the governments of Oman and Dubai to calculate the Official Selling Price for crude oil exports, and Oman crude is widely used as a global reference price.

Oman oil prices have been in a downwards trend since peaking in June above $111/b and the latest losses came following Wednesday's release of OPEC's influential Monthly Oil Market Report, which cut its oil demand forecasts for both 2014 and 2015, while at the same time increasing supply forecasts. The report also noted that Saudi Arabia, the cartel's kingpin, had cut its crude production by about 400,000 barrels a day during August in response to softer demand and declining prices.

The Oman market structure has also moved into contango, whereby oil for near-month delivery is cheaper than oil further out, which is typically taken as a sign of weak fundamentals. The spread between the front-month November contract and December was around minus 85 cents/b, while December/January is trading at minus 50 cents/b.

Christopher Fix, Chief Executive of DME, said: "The market has clearly moved to an oversupply situation, which is overriding any geopolitical concerns such as Iraq and Ukraine. Middle East oil producers are facing pressure on a number of fronts and looking for pricing solutions that will help maintain market share, while at the same time achieve a fair market price."

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