SUBSCRIBER NOTE: Platts to remove 25 cent threshold for North Sea Quality Premiums

Following research and consultation with market participants, S&P Global Platts will remove the minimum threshold currently applied for the calculation of month-ahead Ekofisk and Oseberg Quality Premiums. This change will be made to the QPs applying to cargoes loading from January 1.

This means that the January QPs for both grades incorporating this change will be announced December 1.

The proposal note for this change is available here: https://www.platts.com/subscriber-notes-details/21385839

Currently, Platts applies a threshold for the minimum value of the quality premiums for Oseberg and Ekofisk such that if they are calculated as less than 25 cents/b, a QP of zero is published.

For cargoes loading from January 1, Platts will remove this minimum threshold and publish a QP even if it is calculated as a positive value lower than 25 cents/b.

The QPs are published on the first working day of each month, and are calculated at 60% of the net price difference between each of Ekofisk and Oseberg, and the most competitive grade of crude among Brent, Forties, Oseberg and Ekofisk during the month prior to announcement.

Platts began publishing Quality Premiums for Oseberg and Ekofisk in June 2013. The QP was designed to allow for the smooth physical delivery of the two grades - both of which are of a higher API than Brent and Forties - into Cash BFOE contract and, additionally, allowed for both grades to play an active role in the pricing of physical Dated Brent. Initially, the QPs were introduced with a minimum threshold of 50 cents/b and were calculated as 50% of the net difference between either Oseberg or Ekofisk and the lowest crude in the BFOE basket.

Platts remains committed to the smooth functioning of the QP system, and is constantly reviewing the existing methodology to ensure it is continuing to operate efficiently. Platts amended the threshold to 25 cents/b and the calculation to 60% for these quality premiums in 2015, in response to changing dynamics in the North Sea.

Given the continuing low outright price environment, the growth of North Sea demand outside of Europe and the global narrowing of sweet versus sour crude spreads, Platts is further amending the QP to better reflect the dynamics of the BFOE market.

Platts does not currently propose to amend elements of the QP methodology other than the minimum threshold.

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