Platts to amend Murban crude quality premium assessment methodology

Following extensive industry consultation, Platts, part of S&P Global Commodity Insights, will amend its methodology used to calculate the quality premium applicable to the delivery of Murban crude oil upon physical convergence of Dubai, Upper Zakum, Oman or Al Shaheen crude partials in the Platts Market on Close assessment process from S&P Global, with effect from Feb. 1, 2023.

Platts first proposed this change in a subscriber note Nov. 4: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/110422-platts-proposes-to-amend-murban-quality-premium-methodology

QP METHODOLOGY: Starting Feb. 1, 2023, Platts will publish a daily Murban QP at 50% of the net price differences between Platts Murban (M+2) and Platts Oman (M+2) assessments over 15 business days prior to the day of publication. Platts will publish the Murban QP prior to 11 am Singapore time each day. For example, on Feb. 1, 2023, Platts will publish the Murban QP, applicable to declarations of April-loading cargoes, at 50% of the spread between the daily Platts Murban (M+2) and Platts Oman (M+2) assessments over 15 publication days ending on and including Jan. 31, 2023. Similarly, the Murban QP published on Feb. 2 for declarations of April-loading cargoes will reflect data over 15 publication days ending on and including Feb. 1. Platts will announce a QP of zero if 50% of the observed price difference between Platts Murban and Platts Oman over the 15 publication days is less than 50 cents/b.

APPLICATION OF QP ON CONVERGENCE: During its engagement with market participants, Platts also discussed the mechanism for the application of QP on declaration of Murban cargo into the partials mechanism after the proposed changes take effect. Based on the feedback, starting Feb. 1, 2023, the Murban QP applicable for payment from a buyer to the seller will be the QP published on the day of the convergence. For example, if a seller declares a Murban cargo upon convergence on Feb. 24, the buyer will pay the Murban QP published on Feb. 24 that would reflect data over 15 publication days ending on and including Feb. 23.

RATIONALE FOR THE CHANGE: Global oil markets have witnessed significant volatility in the value of light, sour crude such as Murban versus medium, heavy grades such as Oman in recent years on the back of pandemic-induced changes to demand-supply balances. In recent months, Platts has observed increasingly sharper swings in Murban/Oman spreads in the wake of the Russia-Ukraine war that has affected conventional trade flows of oil globally. The changes in the Murban QP mechanism are aimed at ensuring that the QP continues to reflect prevailing Murban/Oman spreads. The 15-day rolling mechanism will allow the QP to be more responsive to changes in the Murban/Oman spread while tempering the impact of any sharp day-to-day moves.

CHANGES TO PUBLICATION: Effective Feb. 1, the daily Murban QP will be published under the symbol AASVA00 in Platts Global Alert pages 2210, 2220 and Crude Oil Marketwire. From Feb. 1, 2023, Platts will not update the monthly Murban QP that is currently published under the symbol AAISV00. The current monthly Murban QP (AAISV00) would be last updated on Jan. 3, 2023, and will be applicable to trade for March-loading (M+2) cargoes in the full calendar month of January.

CURRENT MURBAN QP METHODOLOGY: Currently, Platts publishes a monthly Murban QP (AAISV00) on the first publication day of each month for cargoes loading M+2. As an example, Platts announces Murban QP on the first business day of July, which is applicable for cargoes loading M+2 in September that typically trade in the calendar month of July. For example, the QP for September-loading cargoes is calculated using data from the full month of June and announced on the first publishing day of July. A QP of zero is announced if 60% of the observed price difference between the grades over the prior month is less than 50 cents/b.

BACKGROUND ON MURBAN QP: Murban QP is an additional premium that a seller receives from a buyer for the nomination and delivery of a cargo of Murban crude oil into a physical convergence of Dubai, Al Shaheen, Upper Zakum or Oman partials during the MOC. Benchmark Platts Dubai and Platts Oman assessments take into consideration trading activity for full 500,000-barrel cargoes and 25,000-barrel partial cargoes. In partials trade, a physical convergence to a full 500,000-barrel cargo occurs when the same buyer and seller have traded 20 partials for a specific contract month. In Dubai partials mechanism, at the point of execution of the 20th partial trade the seller has the option to declare a physical cargo of Dubai, Upper Zakum, Oman, Al Shaheen or Murban crude. In the Oman partials mechanism, the seller has the option to declare Oman or Murban crude cargo upon convergence. Similarly, Murban crude is also deliverable upon convergence of partial trades in Upper Zakum and Al Shaheen.

Questions and comments on this decision can be sent to asia_crude@spglobal.com and PriceGroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by S&P Global for public viewing. S&P Global will consider all comments received and will make comments not marked as confidential available to the public upon request.