SUBSCRIBER NOTE: Platts proposes Quality Premium for Murban crude oil

Following extensive feedback and market engagement, Platts proposes to introduce Quality Premiums for Murban crude oil delivered into its Middle East crude oil benchmark.

Platts has widely engaged on this proposal with stakeholders representing a full range of market and industry participants in Asia, the Middle East and Europe. Platts first proposed a QP for Murban in a subscriber note published on September 3, 2015. That note is available here: http://www.platts.com/subscriber-notes-details/27773417 Please send all comments, feedback and questions by April 11 to asia_crude@platts.com and pricegroup@platts.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.

QUALITY PREMIUM: Quality Premiums would be paid by a buyer to a seller for the nomination and delivery of a cargo of Murban crude oil into a physical convergence of Dubai, Al Shaheen, Upper Zakum or Oman during the Platts Market on Close assessment process.

ANNOUNCEMENT OF QPS: Platts would announce the Murban QPs on the first publishing day of each month, two months prior to the QP coming into effect. As an example, Platts would announce the Murban QP on the first business day of July, for cargoes loading in September. This calendar aligns with typical trading practices, where September cargoes are primarily traded in the month of July.

TIME SPAN REFLECTED IN CALCULATIONS: Platts has studied a variety of proposals submitted for how QPs could be calculated, and notes a spectrum of support for different approaches, particularly regarding the time spans that could be used to generate QP values. Platts proposes to use a single month of data to generate its Murban QP to ensure the value is as close as possible to recent market activity, and invites feedback on this proposed time span.

CALCULATION METHODOLOGY: Platts proposes to publish a Murban QP at 60% of the net price differences between Platts front-month cash Murban assessment and Platts front-month cash Oman assessment during the full month prior to announcement. A QP of zero would be announced if 60% of the observed price difference between the grades is less than 25 cents/b.

IMPLEMENTATION DATE: Platts invites feedback on the appropriate implementation date for the Murban QP. Platts has noticed support for a prompt implementation.

BACKGROUND: From January 4, 2016, Platts started to reflect bids, offers and expressions of interest to trade in Oman partials only where the buyer is willing to take delivery of destination-free Murban crude oil, as well as the possible delivery of Oman Blend itself. Bids, offers and expressions of interest to trade for all other partials in the MOC -- Dubai, Upper Zakum, and Murban itself -- are all also considered for publication only where the buyer is willing to take delivery of destination-free Murban crude oil upon convergence.

ASSESSMENTS: Under the current assessment process, Dubai, Upper Zakum, Oman, Al Shaheen and Murban are all be deliverable against a Dubai partials convergence. Only Upper Zakum and Murban is deliverable against Upper Zakum convergences; only Oman and Murban are deliverable against Oman convergences; only Al Shaheen and Murban are deliverable against Al Shaheen convergences; and only Murban is deliverable against Murban convergences. The Platts Dubai assessment therefore reflects the most competitive crude in the group. Platts Oman, Upper Zakum, Al Shaheen and Murban values are assessed in their own right, but no assessments are above the assessed value of Murban, the highest quality crude in the group.