S&P Global Platts opens consultation on inclusion of WTI Midland crude in Dated Brent

Following an extended period of research, market outreach and review, S&P Global Platts is opening a formal consultation regarding the inclusion of WTI Midland crude in its Dated Brent benchmark, and all related assessments.

Platts invites comments, questions and other feedback on the below proposals by Feb. 5, 2021.

RATIONALE FOR POSSIBLE INCLUSION: Since US crude exports restarted in 2015, WTI Midland has become a mainstay for European crude imports and a core part of the North Sea crude oil market. The grade is a close fit to the existing North Sea basket in terms of quality, pricing and consumption. The addition of the grade to the basket would provide additional volume and would further ensure the continued robustness of the Dated Brent FOB benchmark.

CURRENT METHODOLOGY: Under current Platts methodology, Platts reflects bids, offers and trades for FOB cargoes of Brent Ninian Blend (BNB), Forties, Oseberg, Ekofisk, and Troll loading 10 days forward to one month ahead, and assesses each of these grades separately. Platts also reflects bids, offers and trades for cargoes of these grades on a CIF-delivered basis 12 days forward to one month ahead, and adjusts these values for freight to arrive at comparable FOB values. The Dated Brent assessment reflects the most competitive of these grades on an FOB and CIF-adjusted basis for each day in the loading period.

Platts also publishes assessments for Cash BFOE three months forward. Platts reflects bids, offers and transactions where the buyer is willing to take delivery of any of the five grades in the Dated Brent basket (Brent Ninian Blend, Forties, Oseberg, Ekofisk, and Troll) as nominated by the seller.

WTI MIDLAND: Specifically, Platts is inviting market feedback on the potential addition of US WTI Midland to the basket of crudes reflected in its Dated Brent FOB North Sea, Dated Brent CIF Rotterdam, and Cash BFOE assessments. WTI Midland is a light, sweet crude oil with a typical average monthly export volume of 1.078 million barrels per day during 2020, of which around 443,000 b/d arrived in Europe. WTI Midland is typically sold into Europe on a delivered basis.

Platts assesses cargoes of WTI Midland for delivery DAP basis Rotterdam 20-60 days after date of publication. Other reasonable delivery ports within Northwest Europe may be nominated, with the buyer covering all reasonable incremental delivery costs. Platts assessments reflect a standard Aframax cargo size of around 600,000 barrels, though cargoes of between 500,000 barrels and 700,000 barrels may be bid or offered in the Platts Market on Close assessment process and are normalized back to a 600,000 barrel standard.

Platts also assesses cargoes of WTI Midland on an FOB Scapa Flow basis. This assessment is published as both an outright price and as a differential to Dated Brent for 600,000 barrel cargoes loading FOB from the ship-to-ship [STS] area at Scapa Flow 10 days forward from date of publication to one month ahead. The assessment reflects bids, offers and trades for WTI Midland FOB Scapa Flow, as well as DAP Rotterdam adjusted for freight.

In assessing the value of WTI Midland on an FOB Scapa Flow basis, Platts considers bids and offers for the grade loading STS basis Scapa Flow. Platts also considers bids and offers of WTI Midland on a Rotterdam delivered basis, which are converted back to Scapa Flow using the existing freight adjustment factor (FSFRM00). Platts invites feedback on whether it should only reflect bids and offers for 600,000 barrel cargoes or to also include larger cargoes.

Under this proposal, Platts would include WTI Midland FOB basis Scapa Flow in the Dated Brent basket, alongside Brent Ninian Blend, Forties, Oseberg, Ekofisk, and Troll. Subsequently, on each date of the assessment period the most competitive of the six grades would be used to form Dated Brent.

Platts published a note on its global WTI Midland specifications Aug. 3, 2020 which is available here:

https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/080320-platts-to-implement-comprehensive-platts-wti-midland-specifications

CASH BFOE: Under this proposal, WTI Midland would also be included as a deliverable grade into Cash BFOE on an STS Scapa Flow basis and would thus be reflected across all Dated Brent assessments. Platts would consider Cash BFOE bids and offers where the buyer is willing to accept nomination of a cargo of WTI Midland STS basis Scapa Flow for the relevant contract month by the seller upon physical performance of the trade.

LOADING PROGRAM: In order to ensure full transparency Platts would publish a daily virtual loading program for WTI Midland reflecting the cargoes available to be bid and offered on an STS Scapa Flow basis 10 days forward to one month ahead. Platts currently publishes up-to-date loading programs for the five Dated Brent basket grades on PGA 1260.

QUALITY PREMIUM: Platts invites feedback as to whether and when to apply a quality premium to WTI Midland.

TIMING OF IMPLEMENTATION: Platts is inviting feedback on a potential implementation for March 2022 cargoes.

FEEDBACK: Platts invites comments, questions and other feedback on these proposals by Feb. 5, 2021. Specifically, Platts invites views on the merits of expanding the group of crudes reflected in its benchmark North Sea crude assessments, any logistical considerations including around the proposed virtual loading program, the possible inclusion of a quality premium, and the potential timing of such an update. Platts will consider all feedback received on these points and any other areas of interest, and provide an update on any possible changes to methodology after the close of the consultation period.

Please send all comments, feedback and questions to Europe_Crude@spglobal.com and pricegroup@spglobal.com

For written comments, please provide a clear indication if they are not intended for publication by Platts for public viewing.

Platts will consider all comments received and will make those not marked as confidential available upon request.