ICE to align WTI Midland quality with Platts Dated Brent specifications
Quantum Commodity Intelligence – The Intercontinental Exchange is set to further align the ICE Midland WTI futures contract with the quality parameters set out by Platts for Midland WTI crude oil eligible for inclusion in the Dated Brent basket.
The contract changes to the crude oil quality of ICE HOU futures include adding a maximum iron content of 10 milligrams per kilogram (mg/kg) and replacing the combined nickel and vanadium maximum content of 3 mg/kg (3 parts per million) to individual maximum contents for nickel and vanadium of 2 mg/kg each.
In addition, the Reid Vapor Pressure (RVP) maximum of the crude will increase by 0.5 pounds per square inch (Psi) to 9.5 Psi.
ICE said in a statement that the contract amendments mean the crude oil quality that is deliverable via ICE's HOU futures contract will align with globally accepted Midland-WTI quality physical cargoes loading at the US Gulf Coast for export to Europe and their potential inclusion in the Platts Dated Brent basket assessment.
The changes are expected to be effective from the June 2024 contract month.
"This is an important final step to align ICE's Midland WTI futures contract with the globally accepted quality standard for the Midland WTI crude grade," said Jeff Barbuto, ICE's Global Head of Oil Markets.
WTI Midland has become a mainstay of the Dated Brent pricing mechanism, with a largely smooth transition after it was selected as an additional grade for the basket of Dated Brent crude.
Quality
However, last year, US crude exports from Gulf Coast terminals were subjected to additional quality checks after concerns were raised over possible off-spec cargoes due to excess metals contaminating shale oil from the Permian Basin.
Concerns were raised over possible excessive levels of iron and vanadium, which had found their way into WTI Midland, indicating cross-contamination could happen during pipeline transportation, tank storage, or the blending process.
Platts' methodology states that WTI Midland nominated via the Dated Brent process must be supplied directly from the Permian, then transported via one of several approved pipelines and shipped from one of the approved export terminals.
Platts methodology states that WTI Midland nominated into Dated chains should not exceed 10ppm iron and 2ppm vanadium. Anything above that level could impact on refinery performance.
Sources told Quantum at the time that US Gulf terminals had tightened up on quality checks since losing status as a 'Platts approved' terminal could cost business.
The HOU contract is physically deliverable to the Enterprise Crude Houston (ECHO) and ONEOK Magellan East Houston (MEH) terminals, both of which are connected to Platts-approved water terminals to deliver Midland WTI into Brent.
Deliveries of Midland WTI-quality crude oil via the HOU contract were over 4.4 million barrels each month during the second half of 2023, said ICE.
