Platts updates Dated Brent methodology, paves way for WTI Midland
Quantum Commodity Intelligence - Price Reporting Agency Platts has issued a further update ahead of June's overhaul of the Dated Brent benchmark, paving the way for the inclusion of WTI Midland crude, effective from the June 2023 Cash BFOE contract month.
As part of the overall methodology evolution and following the decision to include WTI Midland into FOB Dated Brent from June 2023 cargoes, Platts, part of S&P Global Commodity Insights, said it will:
- Discontinue its FOB Scapa Flow WTI Midland assessment;
- Adjust the deemed BL (bill of lading) for CIF Rotterdam WTI Midland to one day forward from the delivery laycan;
- Apply the approved terminal requirement to WTI Midland DAP Rotterdam and Augusta assessments;
- Adjust the basis volume of the DAP Rotterdam assessment to 700,000 barrels from June 2023 cargoes.
Adoption
Market watchers expect a relatively smooth adoption of WTI Midland into the Dated Brent methodology as the benchmark undergoes its largest overhaul since the creation of BFO two decades ago when Forties and Oseberg were introduced as supplementary grades for declining Brent/Ninian output.
Mike Muller, head of Asia at Vitol and veteran Dated Brent trader, told the Gulf Intelligence podcast earlier this month the market had already been trading the June cash contract for many months.
"Therefore the market should be prepared for it and everything should be in the price," said Muller, although noted there were still some technicalities around the terms and conditions to iron out.
"But those fine tunings are not material to the change, which is that you now have a very large amount of Midland that sits as a cap above the established (North Sea) grades and adds an extra pool of liquidity," said Muller.
Basket
Muller added that it would "take quite a lot" for Midland to be the cheapest in the basket of North Sea grades, which would then set the Dated price, given the crude has to be shipped from the US to Europe and then lightered onto a smaller vessel.
However, the former head of Shell trading said the market is ready for the addition of WTI Midland and "on the whole welcomes it, because the deeper the liquidity the more reassuring the benchmark is."
A paper published by The Oxford Institute for Energy Studies (OIES) in March said European and US sanctions on Russian oil are set to strengthen the role played by WTI Midland when the US grade is introduced to the Platts Dated Brent benchmark.
"Trading flows of oil are never permanent. But it is unlikely that Russia will be seen as a reliable oil supplier to Europe for the foreseeable future. This only strengthens the importance of WTI Midland crude in the European refinery diets and therefore in the Brent benchmark," said the paper, authored by trading veterans Adi Imsirovic and Kurt Chapman.
Platts also said Tuesday that the following US Gulf terminals had been approved as loading points for WTI Midland.
Corpus Christi
NuStar Texas North Beach terminal; Flint Hills Resources Ingleside terminal; Pin Oak Terminals Corpus Christi; Buckeye South Texas Gateway; Eagle Ford Terminal Corpus Christi; Buckeye Texas Hub Terminal; EPIC Crude Terminals; Enbridge Ingleside Energy Center.
Houston
Seabrook Logistics Terminal, Energy Transfer Houston Terminal, Enterprise Houston Ship Channel Terminal.
