SUBSCRIBER NOTE: Platts to maintain European freight-based oil assessment methodology in 2016

In August, 2015, Platts published a proposal note indicating it was considering including additional Worldscale differentials in its European freight-based oil assessments in 2016. These differentials were created by the Worldscale Association to reflect higher fixed costs for vessels operating in the Emission Control Areas (ECA), and may have had an impact on a number of Platts net-backs and net-forward assessments across the oil and refined product markets.

However, the Worldscale Association has issued a circular stating that these higher fixed differentials will now be included in the base Worldscale rate and so no further cost additions would be required. As a result, Platts will not include any additional differentials in its European freight-based oil assessments in 2016. Platts published a note confirming this in September.

Platts will continue to calculate its freight-derived cargo assessments by using the $/mt Worldscale flat rates in 2016 or until a market change dictates a different approach. The Worldscale Association is maintaining the additional differentials applicable for transit through or in an ECA for 2015; however, Platts is not reflecting these in its oil or refined product assessments.

Platts wishes to clarify that this extends to all published freight-based oil assessments in Europe, including in refined oil products: ULSD 10 ppm FOB NWE Cargo, ULSD 10 ppm FOB NWE Le Havre Cargo, Diesel 10 ppm CIF UK, Diesel 10 ppm CIF NWE, Gasoil 0.1% FOB NWE Cargo, HSFO 3.5% FOB NWE Cargo, CIF MED naphtha, FOB MED naphtha and Jet FOB MED and FOB NWE.

In crude oil, assessments affected include; Urals (Ex-Baltic) and Urals (Primorsk).

Throughout 2015, Platts tanker assessments have not reflected the additional costs associated with using low sulfur fuels in ECA zones, as clarified in subscriber notes published by Platts in October and December 2014. Platts tanker assessments will continue to reflect the repeatable Worldscale- or lumpsum-based value of the various vessel classes and routes at 16:30 London time, as per Platts existing assessment methodology.

Currently Platts normalizes two of its freight routes, which are affected by the existing ECA differential, namely the Baltic-UK Continent assessment, basis 30,000 mt and the UKC-UKC assessment, basis 22,000 mt. Platts normalizes these routes from the ECA-inclusive rates traded in the market to reflect non-ECA inclusive values, in line with existing Platts methodology. Such normalization will no longer be required in 2016 once the ECA differential is included in the Worldscale rate and as the general freight market adjusts to the new rules. Platts will notify the market of any subsequent clarifications of its methodology regarding this matter.

Please send any comments or queries to europe_products@platts.com and pricegroup@platts.com.

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