02 Mar 2020 | 11:37 UTC — New York
Platts begins WTI Midland FOB Scapa Flow assessment
S&P Global Platts has begun an assessment of WTI Midland FOB Scapa Flow that is published in conjunction with its existing WTI Midland DAP basis Rotterdam assessments, effective March 2, 2020.
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.
This follows a proposal note published December 4, the details of which can be found here:
The proposal note was for an FOB Rotterdam basis, but during the feedback period Platts received market support for an FOB assessment of WTI Midland at the STS area at Scapa Flow.
A decision note was published February 21, and can be found here:
The assessment reflects bids, offers and trades for WTI Midland FOB Scapa Flow, as well as DAP Rotterdam adjusted for freight. Should a firm DAP Rotterdam offer for WTI Midland -- after adjusting for freight, port fees and sailing time -- be more competitive than a comparable bid for the grade on an FOB Scapa Flow basis, the DAP Rotterdam offer would take precedence in the final assessment of WTI Midland on the loading dates in question.
In the absence of prompt market information, Platts assesses WTI Midland FOB basis Scapa Flow as a differential to its existing DAP Rotterdam WTI Midland assessment, accounting for the difference in market structure, and deducting the cost of freight from Scapa Flow to Rotterdam using a freight adjustment factor.
FREIGHT ADJUSTMENT FACTOR (FAF): Platts uses a freight adjustment factor for WTI Midland, in line with the factors for current North Sea CIF Rotterdam grades, at 80% of the relevant freight rate. Platts publishes a 10-day rolling freight average the day before each day's Market on Close assessment process, to ensure the freight factor is fully known before the assessment process begins. For WTI Midland FOB Scapa Flow, this would be based on its 10 previous assessments of the Dirty Cross-UK/Continent 80,000 mt Worldscale freight assessment, applied to the Scapa Flow-Rotterdam Worldscale flat rate.
The Worldscale flat rate used to represent the Scapa Flow-Rotterdam route in 2020 is $4.24/mt. The conversion factor for the FOB Scapa Flow assessment is 7.80, in line with the existing Platts WTI Midland assessment [PCACJ00]. This means a $/b Worldscale flat rate of $0.544 for the FOB Scapa Flow assessment.
The Rotterdam port fee is 13 cents/b.
PRICING BASIS: Platts publishes assessments for WTI FOB Scapa Flow as an outright price and as a spread to Dated Brent. Platts may publish bids and offers on an outright price basis, or as a differential to Cash BFOE or any commonly used pricing mechanism including ICE Brent futures.
VOLUME: The WTI FOB Scapa Flow assessment reflects a typical Aframax cargo of 600,000 barrels with +/-1% operational tolerance at buyer's option.
OIL QUALITY: Platts standards for WTI Midland cargoes globally reflect crude originating from one of six pipelines along the US Gulf Coast: BridgeTex, Cactus, Cactus II, Longhorn, Midland-to-ECHO I and Midland-to-ECHO II. The origin pipelines referenced in the assessments may be expanded or modified over time to reflect market-accepted sources of Midland-quality crude shipped directly from the Permian Basin as Texas' crude oil infrastructure evolves.
TRADE TERMS: Counterparties in a trade reported during the MOC process are expected to perform basis typical bilateral trading and credit terms that have been applied and accepted by both counterparties in the open market.
TIMINGS: All increments and timings for the WTI Midland FOB Scapa Flow assessment are in line with Platts' existing North Sea CIF assessments.
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