Platts seeks feedback on oil trading standards around EU ETS shipping costs

Platts, part of S&P Global Commodity Insights, is seeking feedback on evolving trading norms in crude and refined products markets with regards to tanker freight costs in the context of the European Union's Emission Trading System.

Platts observations thus far indicate that carbon offset costs following shipping's inclusion in EU ETS from Jan. 1, 2024 are expected to be incorporated in the overall freight costs typical of CIF trading terms.

With regards to bids, offers and trades in the Platts Market on Close assessment process where the loading and/or discharge ports fall within the scope of the EU ETS, Platts has observed that charterparty agreements governing the performing vessels are expected to absorb costs arising from any EU ETS obligations within the freight calculation.

As with any deviation, the buyer has the right to request a deviation of the ship to another port, provided the shipowner has granted, or has the ability to grant, the deviation to the charterer. Any incremental expenses associated with the deviation are borne by the buyer as he/she is initiating the request for the deviation and this may extend to costs arising from EU ETS obligations.

Platts wishes to remind market participants that, in its Market on Close assessment process, it may publish bids, offers and trades from locations other than the basis port and may normalize them back to the basis port for assessment purposes. In determining plausible origins or destinations and the gradient of freight normalization, Platts will take into account prevailing spot market flows, including any structural change in flows and prevailing freight rates at the time the bids, offers or trades are reported, which may also extend to ETS costs. This is subject to daily review and exercise of editorial judgment, as per existing methodology.

Separately, Platts also clarified the methodology employed for its freight assessments and EU ETS for European crude and refined products netbacks and net-forwards assessment calculations in a subscriber note published Nov. 20, 2023 and reachable at: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/112023-platts-clarifies-freight-assessments-and-eu-ets-for-european-crude-and-refined-products-netbacks-and-net-forwards-assessm

A subscriber note published Nov. 2, 2023, clarified that Platts clean and dirty tanker $/mt, Worldscale point and lump sum freight assessments will continue to be assessed exclusive of carbon offset costs following shipping's inclusion in the EU ETS from Jan. 1, 2024.The subscriber note can be reached here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/110223-platts-clarifies-tanker-freight-assessments-to-continue-to-exclude-eu-ets-carbon-offsetting-cost.

Platts continues to monitor the evolution of freight markets in the context of the EU ETS and the impact on prevailing freight costs for crude and oil products and welcomes feedback on the subject.

Please send any feedback, questions or comments to Europe_products@spglobal.com, 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.