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Global commodity markets are undergoing significant restructuring due to factors such as the energy transition, evolving geopolitical alliances, financial constraints, and growing concerns about supply chains. Arab financial markets are now coming to the forefront after years of slow growth with major national oil companies (NOCs) in commodity trading, represented by Aramco Trading and ADNOC Global Trading/Trading.
Arab financial institutions are increasingly exploring the region’s potential role in trading mines, minerals, metals and agricultural products related to the energy transition. For example, Saudi Arabia’s Tadawul Group announced that it has acquired a 32.6% stake in Dubai Mercantile Exchange (DME), making it the largest joint shareholder along with Chicago Mercantile Exchange (CME) Group.
This strategic move by Tadawul Group aims to increase its regional presence in the commodity market with plans to rebrand DME as Gulf Commercial Exchange. As part of this effort, sectors such as energy, metals and agricultural products will expand significantly. Tadawul Group’s investment of approximately $28.5 million (SAR 107 million) establishes the company as a major player, with an option to take majority control of the exchange after four years. ing.
Khalid Al Hassan, CEO of Tadawul Group, highlighted the strategic importance of this investment, which will provide the Group with access to global commodity trading. The move is in line with the Group’s long-term strategy to diversify its revenue and seize new opportunities. The acquisition includes new and existing shares, with proceeds from the new shares to be used to fund DME’s growth.
Importantly, the share acquisition will maintain DME’s operational structure, which is headquartered in Dubai International Financial Center and regulated by the Dubai Financial Services Authority. CME Group will continue to provide its trading technology and clearing services to Gulf Commercial Exchanges. Related article: Brent setbacks increase as Red Sea fighting continues
Tadawul clarified that this move is consistent with DME’s existing Oman contracts, stressing that Saudi oil contracts will not be traded, sold, purchased, indexed or delivered against DME’s Oman contracts. . The establishment of the Gulf Commercial Exchange aims to address the growing global and regional demand for energy, metals and agricultural products.
Considering the broader context of the Arab Gulf region, this move is consistent with Saudi Arabia’s strategic push to become a major power in minerals, metals and mining. This vision was highlighted at the recent 2024 Future Mining Forum in Riyadh, where Saudi Arabia updated its mining reserves to $2.5 trillion, signaling huge untapped potential. A joint venture between the Public Investment Fund (PIF) and Saudi mining giant Marden to invest in and acquire international commodity interests further underlines this commitment.
In addition to minerals and metals, there is also a clear focus on agriculture as part of the Gulf Commerce Exchange’s growth strategy. The Arab region’s increasing dependence on agricultural imports, coupled with large investments by Saudi Arabia, the UAE, and others in Africa, the Americas, and Europe, emphasizes its goal to play a more influential role in future agricultural trade. ing.
Tadawul Group and other companies have stated that Saudi crude oil will not be traded through the Gulf Commodity Exchange, but a future change cannot be ruled out. The current move is intricately linked to Saudi Arabia’s future plans, particularly its renewable energy strategy, and reflects a broader shift by Arab governments and financial institutions to a more active role in commodity markets. As investment in low-carbon energy and renewable energy projects increases, we expect commodity market restructuring to unfold and more innovative options to emerge.
Written by Cyril Widdershoven, Oilprice.com
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