SUBSCRIBER NOTE: Calculation changes in Brent Frontline Houston swaps calendar

Platts confirms it will update calculation changes for the Brent Frontline Houston swaps assessments effective November 2, 2015.

The methodology change was proposed in a previous subscriber note published on August 4, 2015, which invited comment on the proposal by the end of August.

The change in calculation methodology follows the adoption of the month-ahead standards by ICE for its Brent crude futures contracts, starting with the March 2016 contract. The month-ahead standards were implemented by the physical North Sea Brent crude market in March 2015.

Under current methodology, Platts calculates daily Brent frontline swaps using mean adjusted values for the number of trading days that each futures contract spends as the front month. This is done by calculating the exact number of trading days within each month, which will vary according to the calendar month.

Under new expiry rules, the ICE Brent Futures contract will expire on the last working day of each month. As a result, Platts will continue to calculate daily Brent Frontline Swaps based on the number of trading days that each futures contract spends as the front month.

As a result, the typical weighting of any Platts Brent Frontline Swap assessment will alter, with the weighting given to the front-month ICE Brent Futures contract increasing, and the weighting given to the second month decreasing.

For example, in February 2016, the front-month ICE Brent Futures contract will be April 2016, and this contract will expire February 29. There are 21 trading days in February 2016.

The February Brent Frontline Swap will therefore consist of 20 days of the April ICE Brent Futures contract and one day of the May ICE Brent Futures contract for February 29 (the April contract's expiry date). Platts existing methodology for Frontline Houston crude swaps already excludes from the monthly calculation the front month contract on the day of expiry.

Please send any feedback, comments and queries to americas_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.