Platts proposes to amend MOPAG methodology to reflect spot physical prices

S&P Global Platts invites feedback on a proposal to amend the methodology for its FOB Arab Gulf benchmarks for gasoline, gasoil, jet fuel/kerosene and fuel oil to reflect independent, spot physical market values from Jan. 4, 2021.

Platts FOB Arab Gulf assessments have provided consistent, stable values for over 40 years. During this time they have been established as freight netbacks from FOB Singapore benchmarks.

Over the last several years, the Middle East physical markets have evolved considerably, and spot market values are now consistently and transparently visible. Logistics have evolved to ensure broad market access and flexibility, including through the growth of independent storage at Fujairah, while refinery infrastructure has grown, providing ample supply.

In 2016, Platts launched independent, spot market assessments reflecting oil products loading basis FOB Fujairah. Platts has received significant feedback that the FOB Arab Gulf products assessments should evolve to reflect these same spot market values.

Under the proposal, Platts would assess the MOPAG gasoline, gasoil, jet fuel/kerosene and fuel oil benchmarks based on its Market on Close assessment methodology reflecting bids, offers and trades in the spot market.

The proposal follows extensive discussions with market participants after Platts opened a formal review of its FOB Arab Gulf assessments in April amid concerns that the recent sharp declines in refined oil product prices and a surge in freight rates could result in the netback calculations producing a value at or below zero (http://plts.co/B1DO30qVzu1).

In a subsequent subscriber note published on May 18, 2020 (http://plts.co/fwFv30qVzu8), Platts announced it will only publish a zero or negative value for these benchmarks if prevailing market information demonstrates such values. This means that if a freight netback calculation would produce a value at or below zero, then Platts would consider relevant spot market information instead and use this in its assessment of FOB Arab Gulf values.

Under the new proposal, effective Jan. 4, 2021, Platts MOPAG assessments for gasoline, gasoil, jet fuel/kerosene and fuel oil would reflect trade on a free-on-board basis at good ports across the Gulf, fully normalized to FOB Fujairah basis. The proposal does not initially affect Platts MOPAG naphtha assessments, which will continue to be published as a netback from its C+F Japan naphtha benchmark.

Platts already assesses spot market values for 95 RON gasoline, 10 ppm sulfur gasoil, jet fuel and 380 CST high sulfur fuel oil in the Middle East on a FOB Fujairah basis, reflecting bids, offers and trades heard in the broader market and reported in the MOC process.

Following the change effective Jan. 4, 2021, the MOPAG assessments would mirror the 'FOB Fujairah' independent price assessments and continue to reflect 4:30 pm Singapore/12:30 pm Dubai timestamp.

The MOPAG outright assessment would reflect the existing spot differential (premium/discount) assessment of the product, plus the relevant MOPAG strip value. The MOPAG strip reflects the average of daily swap values over a 21-day period between 20-40 days from the day of publication. The MOPAG assessments would also reflect the same specifications and terms of the existing differentials, for cargo sizes of 200,000-300,000 barrels each, or 20,000-40,000 mt in the case of fuel oil.

The MOPAG derivatives assessments and values are based on trades seen in the Platts MOC process or on derivatives exchanges or heard in over-the-counter markets. Platts would also take into consideration physical bids, offers and trades on a FOB Arab Gulf basis in the MOC process. In the absence of any bids, offers or trades, Platts will take into consideration the respective Singapore derivatives coupled with freight netback and forward freight agreement values.

For MOPAG 0.005% sulfur, 0.05% sulfur and 0.25% sulfur gasoil assessments, these grades would be assessed by applying the spot differential for the respective grade to the MOPAG Gasoil strip. Currently, the MOPAG outright assessments for these grades are assessed by applying the spot differential assessed for the respective grade to the primary FOB AG Gasoil netback, minus the assessed spot AG differential for Gasoil itself.

Platts began publishing the FOB Fujairah assessments on Oct. 3, 2016 and these currently run alongside Platts MOPAG netback assessments. Details of these assessments are available here: http://plts.co/9rmN30qVBC4.

The following FOB Arab Gulf netback assessments, published in Asia-Pacific/Arab Gulf Marketscan and Platts Global Alert pages 2004, 2420, 2404, 2005, 2421, 2520, 2405, 2402, 2502, 2320, 2304, 0027, 0035, 2521, 2321, 2305,2503, 2403, 0039, 0032, 0024 and 0030 would be affected:

Assessment Code Monthly average

Gasoline 95 unleaded AAICY00 AAICZ00

Gasoline 92 unleaded AAGJA00 AAGJA03

Kerosene PJAAA00 PJAAA03

Gasoil 10 ppm AAIDT00 AAIDT03

Gasoil 0.005% sulfur AASGJ00 AASGJ03

Gasoil 0.05% sulfur AAFEZ00 AAFFG00

Gasoil 0.25% sulfur AACUA00 AACUB00

Gasoil POAAT00 POAAT03

HSFO 180 CST ($/mt) PUABE00 PUABE03

HSFO 380 CST ($/mt) AAIDC00 AAIDD00

Please send all feedback and comments to asia_products@spglobal.com and pricegroup@spglobal.com by Aug. 7, 2020.

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.