Commodities and energy pricing agency S&P Global Platts will defer changes to its core dated Brent oil benchmark after industry pressure, it said on Wednesday, Reuters reports.
The company said it has opened further consultation with the market on the benchmark transition. The changes, among which was inclusion of U.S. crude WTI Midland in the Brent assessment, were announced on February 22 and were due to take effect from July 2022.
The European Brent benchmark is crucial to the global oil system because it is used to price more than half the world’s physical crude trades. Currently, the benchmark is based on the value of five North Sea crude grades: Forties, Brent, Oseberg, Ekofisk and Troll.
Platts said it does not have a fixed timeline to discuss alternatives, such as one put forward by Trafigura, however the reform was needed urgently.
“Next year, we see North Sea production falling below one cargo per day in the BFOET benchmark grades so timeline is there anyway in the fundamentals,” Jonty Rushforth, a senior director in the Platts price group, said.
Global commodities trader Trafigura has proposed using its Corpus Christi terminal, along with others in the Texas hub, as a FOB (free on board) loadpoint solution.
The agency has asked law firm Fieldfisher to structure the working group process, the first time it has hired external counsel for a consultation. Prior to the February announcement, Platts had held a long consultation with the oil market.
A move to include WTI Midland in the benchmark was widely expected, but a proposal to change shipping standards for the whole index and Midland within the assessment has raised concerns about loss of cargo value and destination flexibility.
“We received extensive feedback from market participants in support of introducing WTI Midland into the basket, but there is not agreement on how it would be fully reflected into the wider Brent complex,” Vera Blei, head of oil markets price reporting at Platts, said in a statement.
“(We) believe the best route forward is to defer changes to the core FOB dated Brent complex.”
The benchmark is calculated on a free-on-board basis, without freight costs. Platts had said it would shift to a CIF-based benchmark, where cargoes include the cost of insurance and freight and would also publish a FOB version, whereby it subtracts freight costs from the new CIF benchmark.
