US WTI Midland crude oil will be incorporated into the Platts Dated Brent and related benchmark assessments from June 2023, S&P Global Commodity Insights said June 8, with the first-ever inclusion of a non-North Sea grade expected to boost the liquidity of oil's most important price benchmark.
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Platts, part of S&P Global, said WTI Midland would join the existing Norwegian and UK grades included in Dated Brent, Cash BFOE and related assessments, which are used in Europe and worldwide to help price crude oil.
A number of adjustments will be made to ease the inclusion of the new entrant, which is derived from US shale formations and loaded in the Gulf of Mexico, including vetting US terminals from which eligible cargoes are loaded, Platts said.
Platts also plans to increase the size of cargoes used in Dated Brent assessments to 700,000 barrels from 600,000 barrels, in line with a trend toward larger cargoes and vessels in the Atlantic region.
However, assessments will continue to be made on an FOB (free on board) basis, with an adjustment mechanism to incorporate WTI Midland oil sold on a CIF (cost, insurance, freight) basis. The change takes effect from June 2023 cargo deliveries.
Vera Blei, global head of established benchmarks at S&P Global Commodity Insights, said "a clear path forward" had been identified for Dated Brent and the inclusion "will help ensure a stronger and more robust Brent complex for the decades ahead."
The company said in the course of consultations it had received "widespread support" for its plans for the light sweet crude benchmark, adding the change reflects fundamentals following the decision of US authorities to lift crude export restrictions in 2015.
"Platts appreciates that the inclusion of WTI Midland into the Brent complex requires detailed methodological evolution. Building on the feedback received, this decision sets out the pathway for the grade's inclusion into Dated Brent," the company said.
"WTI Midland crude has established itself as a mainstay in the European refining sector and increasingly reflected seaborne market fundamentals," Blei added.
Platts has made a number of adaptations to Dated Brent over the last 20 years, previously adding crude from a number of North Sea fields as the original Brent field went into decline. Loadings of the current basket of Dated Brent crudes totaled less than 800,000 b/d in 2021, down from over 1 million b/d a decade earlier.
Further work will be carried out to smooth the benchmark evolution as a number of parties propose amendments to the mainstay SUKO 90 North Sea crude oil contract, Platts added.
Shell announced May 23 amendments to its SUKO 90 terms governing forward trades of the existing eligible grades to allow for the delivery of US WTI Midland crude in a cash BFOE cargo on a CIF basis, meaning the cash seller would be responsible for vessel chartering.
"We are aware of several sets of bilateral contract amendments in the Brent cash forward market being discussed among North Sea market participants. The complexity and variety of these terms mean that no industry standard is yet to emerge so far ahead of implementation, and Platts looks forward to working with market participants to further define the forward mechanism to be included into the Dated Brent complex," Blei said.