Platts amends Murban/Oman Quality Premium calculation to rolling 15-day average
Quantum Commodity Intelligence – Platts, a part of S&P Global Commodity Insights, confirmed it has amended the methodology used to calculate the Quality Premium applicable to the delivery of Murban crude oil upon physical convergence in what is colloquially referred to as the 'Dubai window'.
The Murban QP will now be calculated as 50% of the observed price difference between Platts Murban and Platts Oman in the 15 business days prior to the day of publication.
Murban is one of the grades deliverables into the key Dubai benchmark following convergence of 20 partials traded in the window between the same two companies.
In a statement released Wednesday, the Price Reporting Agency said: "Platts publishes the Murban QP prior to 11 am Singapore time each day. For example, on Feb. 1, 2023, Platts will publish the Murban QP, applicable to declarations of April-loading cargoes, at 50% of the spread between the daily Platts Murban (M+2) and Platts Oman (M+2) assessments over 15 publication days ending on and including Jan. 31, 2023."
Oman typically trades at parity or a small premium to Dubai, according to Quantum data.
Murban is also traded as a futures contract on ICE Futures Abu Dhabi (IFAD), while Oman futures are traded on the Dubai Mercantile Exchange (DME).
Dubai settlement
Murban was originally introduced into the Dubai basket to boost physical volumes available in the price-discovery mechanism, allowing the grade to be nominated for physical cargo settlement against Dubai, which is required after companies transact 500,000 barrels – or 20 partials of 25,000 barrels - in the same direction with a counterparty.
As a light sweet grade, Murban was rarely nominated on convergence against the medium sour Dubai benchmark, but market volatility between low and medium sulfur crudes, coupled with the QP, occasionally makes it attractive for the seller to nominate Murban following convergence.
"In recent months, Platts has observed increasingly sharper swings in Murban/Oman spreads in the wake of the Russia-Ukraine war that has affected conventional trade flows of oil globally," said Platts.
"The changes in the Murban QP mechanism are aimed at ensuring that the QP continues to reflect prevailing Murban/Oman spreads. The 15-day rolling mechanism will allow the QP to be more responsive to changes in the Murban/Oman spread, while tempering the impact of any sharp day-to-day moves."
Platts previously calculated the QP at 60% of the net price difference between its front-month cash Murban assessment and Platts front-month cash Oman assessment during the full month prior to the announcement.
The QP acts as a 'rebate' for the selling party, to compensate for settling a Dubai physical convergence with what is typically the higher-priced Murban grade.
