Platts will include WTI Midland in its Dated Brent assessment from June 2023 – the first time a non-North Sea grade will be used to help set oil’s most important benchmark.
WTI Midland will be added to the existing basket of Norwegian and UK grades included in the current Dated Brent, Cash BFOE and related assessments, used as a reference point for around two-thirds of the world’s oil trade, the price reporting agency said on Wednesday.
The existing five crude oil grades currently used for the light, sweet North Sea crude benchmark are Brent, Forties, Oseberg, Ekofisk and Troll, the last of which was added in 2018.
However, output from the fields is in long-term decline, with Platts now looking to shore up physical supplies to support the price benchmark over the coming years.
In its earlier consultations on the move, Platts said a value for a free-on-board (FOB) equivalent cargo of WTI Midland in the North Sea would be derived by a calculation of an evenly-weighted average of freight values for the five existing ports at Sullom Voe, Hound Point, Sture, Teesside, and Mongstad.
The new pricing assessment will take effect from June 2023 cargo deliveries. The size of cargoes will also be amended to 700,000 barrels – up from 600,000, which has been the standard for some 20 years.
This means that physical cargoes of WTI Midland crude oil could be bid or offered in the Platts Market-On-Close (MOC) price assessment process for Dated Brent from the first publication day in May 2023, and the associated June Cash BFOE value assessed from February 2023, said in a statement.
WTI Midland crude oil is produced mainly in the Permian basin of West Texas.
Part of S&P Global, Platts is an independent provider of information and benchmark prices for the commodities and energy markets.
It currently publishes assessments of WTI Midland in both Northwest Europe and the Mediterranean on the basis of cost, insurance and freight (CIF) and delivered at place (DAP).
“These instruments have shown good liquidity in the Platts MOC price assessment process since their inception, providing transparent and robust data points for assessment,” the group added.
S&P Global Commodity Insights global head of established benchmarks, Vera Blei, added: “We are pleased that after an extensive period of consultation and detailed feedback that we identified a clear path forward, built on adding WTI Midland crude oil into the Brent complex. This is the first time that a crude grade from outside of the North Sea will be reflected in the Brent complex, and the inclusion will help ensure a stronger and more robust Brent complex for the decades ahead.”
Ms Blei noted that since US crude export restrictions were lifted in 2015, Midland crude has become a mainstay within the European refining sector and is increasingly part of seaborne market fundamentals.
“We are aware of several sets of bilateral contract amendments in the Brent cash forward market being discussed among North Sea market participants. The complexity and variety of these terms mean that no industry standard is yet to emerge so far ahead of implementation, and Platts looks forward to working with market participants to further define the forward mechanism to be included into the Dated Brent complex,” she added.