It’s a riddle that has caused a stir in the oil market over the past few weeks after S&P Global Platts, the company that publishes the world’s leading crude price, was announced. on February 22 that they were going to change to the true nature of that criterion, known as Dated Brent.
Just nine days after announcing an ambitious review, which was due to begin in June 2022, Platts had to apologize to the market for the difficulty of the move. A week later it went a step further: the changes would be put up for a time not yet explained.
“Unsurprisingly, it caused a stir in the market,” Adi Imsirovic, a senior researcher at the Oxford Institute for Energy Studies and an experienced oil trader, said in a revised paper. nothing short of a revolution. “
While Platts may have stalled the plan, what marked the saga was actually a more fundamental problem facing the global oil market. Books of Brent oil – named after a Scottish oil field that emerged in the 1980s – have slowed. Platts expanded what made up ‘Brent’ to include four more levels – Forties, Oseberg, Ekofisk and Troll – but even those that run out are gradual.
With fewer barrels for trade, the downturn is a risk to reliability and step credit that will affect everything from crude oil deals, to remanufacturing contracts and long-term drilling. Gas supply contracts and a number of products – even Brent crude futures – will all be subject to different rates on that same number, which will be announced every day shortly after 4:30 pm in London.
Platts’ idea was quite radical: add American crude to the mix and base its oil price assessment on the delivery freight trade, a move that effectively adds shipping cost to price. So far they have been based on barrel prices as they are loaded.
As soon as the changes were announced, it became clear that market segments were unprepared. There was an increase in the value and trading of derivatives contracts reported Dated Brent.
Retailers almost left the market because of uncertainty ruling over how the price would look next year. Both Platts and the Intercontinental Exchange Inc. then added. out a clarification that brought prices back.
Platts says it has made it clear that it will publish the value of Dated Brent at the loading stage no later than July 2022. ICE declined to comment.
Before the plans were confirmed, ICE sent a letter to Platts saying the changes were too early. The exchange, in response to Platts’ original proposal in which loads would be priced at the loading rate, had an open interest in contracts after the proposed implementation date, so it demanded a delay. to inform the market of the review, which was provided.
“ICE does not have such a good time,” the letter said. “The proposal, if adopted, would represent the most radical change in the Brent market to date. “
Production problems
While ICE, or Platts, may not have the luxury time. The company says shipments of the five standard levels will fall below 600,000 barrels – or one cargo – per day in 2022. They averaged 868,0000 per day last year, according to loading programs released by Bloomberg together.
Several solutions have been spun over the years, from incorporating Russian oil into the mixture, to West African barrels. There is also a large new oil field from Norway called Johan Sverdrup that could solve the market problems at a stroke – if not for the heavier and more sulfur crude pumping.
Proposed solutions to implement Platts ’off-the-shelf approach now included one trading giant, Trafigura Group to use its Corpus Christi building and publish a loading program for U.S. crude supplies. Other market participants also put forward a wide range of ideas for what Platts should do.
It was that spectrum of responses that provided the delay, Platts said. The next will be a series of working groups – organized by Platts for North Sea oil traders, led by legal advisers – and an effort to reach agreement on how Ocean oil can work. North and USA trade together.
“We need to be aware of giving all market participants enough timelines, so that they can prepare and be ready,” said Jonty Rushforth, senior director at Platts’ pricing group. But at the same time we are against geology, you cannot change the geology. “
This story was published from a wire group group with no text changes. Only the headline has changed.