WTI crude a frontrunner for inclusion in Dated Brent benchmark: S&P Global Platts

London — The US' main export grade crude WTI Midland is emerging as the frontrunner for a possible inclusion in Dated Brent, the world's biggest benchmark for light sweet crudes, S&P Global Platts' senior director for oil pricing Jonty Rushforth said Monday.

Platts, which publishes the daily Dated Brent assessment that underpins the majority of the world's oil trades, asked for industry feedback in late 2018 on possible additions to the Dated Brent CIF Rotterdam assessment of a number of new crudes.

WTI Midland, which has emerged as a key non-North Sea grade for European refiners, was one of six crude grades shortlisted for possible inclusion into Dated Brent as part of the ongoing efforts to maintain the liquidity of the benchmark. Norway's Statfjord and Gullfaks crude, Kazakh-Russian CPC Blend, and Nigeria's Forcados and Qua Iboe crudes were also seen as potential candidates.

"I think it's fair to say that there has been a broader acceptance of the possibility of WTI," Rushforth said at a press briefing in London. "... it's not us saying we're considering including it. It's us saying: the market is very much talking about that so let's have that in front of us and see how that works."

As part of the process, Rushforth pointed to a new initiative to help assess the compatibility between delivered WTI Midland crude and the existing North Sea grades used to assess Dated Brent.

Platts last week announced the launch of an assessment of WTI Midland FOB at Scapa Flow off Scotland, one of the main locations in Europe for ship-to-ship transfers of crude and products. The new assessment will be published in conjunction with its existing WTI Midland DAP basis Rotterdam assessments, starting March 2.

QUALITY PREMIUM?

Crude output from the UK's offshore Brent oil field has dropped significantly since its peak at around 520,000 b/d in 1984. Subsequent declines in wider North Sea oil output have prompted Platts to include alternative grades to increase the liquidity of the assessment.

At the same time, US crude exports have surged six-fold to 2.8 million b/d from 2015 to 2019. West Texas Intermediate, or WTI, is the flagship US grade of oil produced in the Permian Basins of West Texas and transported by pipe, rail and truck to refiners around the world.

From October last year, Platts included qualifying North Sea crudes -- Brent, Forties, Oseberg, Ekofisk and Troll -- on an adjusted cost, insurance and freight (CIF) basis Rotterdam into in its FOB (free on board) Dated Brent benchmark. The move marked the first time Platts assessed crude being offered on a delivered basis to determine the value of its main FOB Dated Brent assessment, which currently includes falling volumes of crude traded at North Sea terminals.

Given the previous moves by Platts to maintain the liquidity of the Dated Brent assessment as North Sea crude production declines, Rushforth said he believed the North Sea crude volumes underpinning Dated Brent are currently "really healthy".

"So there is not a sense of urgency around adding a new grade," Rushforth said. "[But] there is a strong realization that over the next few years, the basket is going to come under pressure for declining volumes so you've got to have something."

Rushforth said part of the ongoing discussion over the potential inclusion of WTI Midland would be the relative value of the new basket of crudes in Dated Brent, including whether WTI Midland would have a quality premium in the benchmark.