Platts updates guidance on Dated Brent methodology, including freight, deemed B/L pricing, from May 2

As part of the wider changes to its Dated Brent assessment from May 2, Platts, part of S&P Global Commodity Insights, further clarifies its guidelines around WTI Midland indications in the Platts Market on Close assessment process following extensive market feedback ahead of implementation.

This note applies to the following methodology change announced June 8, 2022, and available here:

https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/060822-platts-to-reflect-wti-midland-in-dated-brent-cash-bfoe-from-june-2023

PRICING: For the purposes of assessment, Platts will view all delivered WTI Midland indications, once moved back to a deemed Bill of Lading (B/L), as pricing 2-1-2 around deemed B/L. In line with the existing BFOET grades, Platts will publish bids and offers versus Dated Brent pricing 2-1-2 around deemed B/L, and versus Cash BFOE, ICE Brent futures or on an outright price basis. These are the only forms of pricing which Platts will publish bids and offers for in the MOC. Platts deems the B/L on WTI Midland bids and offers to be one day ahead of the first day of the delivered laycan.

DEVIATION: If no agreement can be reached between buyer and seller on deviation costs, Platts expects counterparties to use the difference between the freight cost from the US Gulf Coast loading terminal of the original cargo-Rotterdam versus the US Gulf Coast-actual discharge port. In the case of deviations to the Mediterranean, counterparties should use the Platts Worldscale assessments for US Gulf Coast-UK Continent (TDUCG00) and US Gulf Coast-Mediterranean (TDUWS00) to calculate the deviation costs unless mutually agreed otherwise.

VESSEL SIZE: All WTI Midland delivered indications in the Platts MOC should be from Aframax vessels, carrying UK Continent and Mediterranean charterparty options. A seller may deliver from an Aframax that has performed a ship-to-ship transfer from another vessel, provided all of the oil on board that vessel has demonstrably loaded at one of the US Gulf Coast terminals approved by Platts. A buyer should not be harmed by a seller's decision to STS onto an Aframax from a vessel which may already be in the North Sea. Any deviation costs from the final vessel should still be calculated by reference to shipping costs from the US Gulf Coast to the UK Continent or Mediterranean.

PAYMENT: Platts views the standard payment for WTI Midland in the Platts Market on Close assessment process to be 30 days after the deemed B/L of the cargo for equivalent loading dates in the North Sea.

INCOTERM: Platts will publish bids and offers for WTI Midland on CIF (Cost, Insurance and Freight) and CFR (Cost and Freight) incoterms. CFR indications may be normalized for insurance costs.

FREIGHT ADJUSTMENT FACTOR: WTI Midland indications will be adjusted to a FOB basis by being moved back one day to the deemed B/L and by deducting a North Sea-Rotterdam Freight Adjustment Factor (FAF). The FAF will be calculated using a volume-weighted average of freight values for the five North Sea ports of Sullom Voe, Hound Point, Sture, Teesside, and Mongstad.

Further details on the Freight Adjustment Factor for WTI Midland can be found in the following clarification note, published Apr. 20:

https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/042023-platts-clarifies-wti-midland-freight-adjustment-factor

CROSS-MONTH CARGOES: With the cargo size on Brent Blend, Forties, Oseberg, Ekofisk, and Troll increasing from 600,000 barrels to 700,000 barrels from June 1, Platts is aware of the possibility that certain late-May 600,000 barrel cargoes could be force-deferred by a North Sea terminal. Platts will publish bids/offers for a limited time on a Free-on-Board (FOB) basis as long as evidence can be provided that the terminal force-deferred the cargo in question. Platts will not publish any bids/offers on a CIF basis for 600,000-barrel cargoes force-deferred into June.

TESTING: Platts understands that typical market practice for the testing of WTI Midland cargoes is basis the load port shore tank. Sellers of WTI Midland cargoes in the Platts Market on Close assessment process are expected to deliver material into a trade meets all Platts specifications.

Please send all further comments to europe_crude@spglobal.com and pricegroup@spglobal.com

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Platts will consider all comments received and will make comments not marked as confidential available upon request.