UAE to shake up old world order as oil trading centre

December 20, 2024, 3:46 PM

UAE minister of state and Adnoc CEO Sultan Al Jaber. The company has been instrumental in turning the UAE into a trading centre

Abu Dhabi and Dubai in ascendance
Shift from Europe and Asia
Covid and Ukraine were catalysts

For years, Geneva, London, Amsterdam and Singapore have been the preferred homes of middlemen helping to move crude oil and its derivatives around the world.

But recent geopolitical and economic shifts have paved the way for the UAE to emerge as a trading powerhouse, attracting international talent and rivalling the old world order.

The UAE has been an important commercial and logistics hub for years, linking Asia to Africa and Europe and trading diamonds and gold.

However, despite being a major producer – the fifth-largest among Opec members – oil was not an area of initial focus.

Now the ambitions of Abu Dhabi National Oil Company (Adnoc), the impact of Covid-19 and the Russian invasion of Ukraine, along with a business-friendly environment, have been the main catalysts for change.

In 2020 Adnoc established Adnoc Trading (AT) and Adnoc Global Trading (AGT). The former is focused on crude and LNG and is active on ICE Futures Abu Dhabi, an independent exchange for derivatives of the local Murban contract. AGT specialises in refined products.

These two companies have expanded from five employees to more than 400 today.

An industry expert said that the development of these two businesses has been one of the most prominent trading buildouts in the industry over the past couple of years and has paved the way for the UAE to emerge as a global commodity trading centre.

Today, regional companies including Saudi Arabia’s Aramco Trading, Oman’s OQ, Kuwait’s KPC, Bahrain’s Bapco and France’s TotalEnergies have established offices in the UAE. International houses like Ennero Group, Gunvor, Montfort and Vitol are also present.

“If you are in commodity trading, can you afford not to be in the Middle East? No,” said one source.

Covid-19 also pushed profit-hungry traders to relocate from places like Singapore and London. Singapore in particular ordered a long and stringent lock down.

“The UAE managed the pandemic very well, which attracted a lot of people to at first work remotely. Then companies started to open their offices. The talent competition became tight,” said an energy trading recruitment expert.

Russia’s invasion of Ukraine in 2022 resulted in a further influx of talent. Litasco Middle East, a trading arm of Russia’s Lukoil, moved significant operations from Geneva to Dubai and opened an office at Dubai Multi Commodities Centre (DMCC), a specialist freezone which caters to the traders.

Companies like Tejarinaft, Amur Trading, Demex Trading and Qamah Logistics – another significant trader of Russian crude – arrived in Dubai in 2022.

According to a Swiss non-profit Public Eye, 51 percent of Russian crude sold in July 2023 was bought by non-state traders registered in the UAE.

Industry insiders believe that the UAE could displace Geneva, Singapore and London as a premier trading location because of its infrastructure, access to capital and the ecosystem it is building.

James Swallow, commercial director at Sovereign PPG, a business formation agency, told AGBI that international businesses recognise the opportunities offered by the UAE, especially in commodities trading.

In 2024 Sovereign PPG registered an increase of 14 percent in inquiries from commodity trading companies – especially specialists in the oil and gas sector – considering setting up onshore or in free zones like DMCC, Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

Carl Dowling, partner at CBD Corporate Services, which also advises on company formation, said that in the past year he has seen a 21 percent increase in inquiries from oil and gas trading companies, including the US, China, Canada and Brazil.

“We do not foresee a slowdown in the current trend,” said Dowling.

According to experts, the UAE is well placed to service the East and West because of its time zone and also to cater to emerging markets such as Southeast Asia and Africa.

“From a logistical standpoint, it’s very well placed to capture the opportunity,” said a source.

The development of Fujairah port and oil storage facilities outside the Straits of Hormuz have added to the attraction.

However, other hubs retain their attractions.

US companies like Circle K, a large owner of convenience stores, have set up trading entities in Geneva, while Adnoc’s AT and AGT plan to expand in Switzerland and the US.

Swiss-based commodity trading companies handle approximately 35 percent of global oil trade volumes, according to Geneva-based SUISSENÉGOCE which represents banks, commodity trading and shipping companies in Switzerland.