Platts proposes to reflect WTI Midland in Dated Brent, Cash BFOE from June 2023, keeps Brent assessments on an FOB basis

Following a period of extensive market consultation, S&P Global Platts proposes to reflect cargoes of WTI Midland crude oil in its Dated Brent crude oil benchmark, with effect from June 2023 cargo deliveries. This inclusion will extend across the Brent complex, including Dated Brent and its related components, Cash BFOE, and all related instruments. Platts will maintain the assessment of the Dated Brent benchmark and cash BFOE as FOB North Sea values.

• Proposal to add WTI Midland to Dated Brent and all related Platts Brent assessments.
• WTI Midland cargoes on a CIF Rotterdam basis to be reflected in Dated Brent, with FOB value derived by freight netback to established North Sea ports.
• Cash BFOE to include FOB USGC WTI Midland cargoes on freight- and time-adjusted basis, with title and risk passing from seller to buyer in international waters.
• Platts proposes moving all Dated Brent and cash BFOE cargo sizes to 700,000 barrels from 600,000 barrels.

CONSULTATION: Since launching a formal consultation on July 21, 2021, Platts has received growing and widespread support for the inclusion of WTI Midland in the Brent complex. The feedback received included a wide range of ideas and proposed mechanisms for the inclusion of WTI Midland. Platts appreciates that the inclusion of WTI Midland into the Brent complex requires detailed methodological evolution. Building on the feedback received, this proposal sets out a pathway for the grades inclusion into Dated Brent, Cash BFOE, and other related instruments.

TIMING OF IMPLEMENTATION: Platts will include WTI Midland cargoes in the Dated Brent assessment from cargo delivery periods starting June 2023. Such physical cargoes could be bid or offered in the Platts Market on Close assessment process for inclusion in Dated Brent from the first publishing day in May, 2023, with the associated June Cash BFOE value assessed from February, 2023.

WTI MIDLAND INTO DATED BRENT: As part of this change, Platts would amend Dated Brent to reflect the bids, offers, and transactions for the most competitive grade of Brent/Ninian Blend, Forties, Oseberg, Ekofisk, Troll, and WTI Midland, on an FOB and freight-adjusted FOB North Sea basis. Platts proposes to reflect bids, offers, and transactions of WTI Midland on a CIF Rotterdam basis in its Market on Close assessment process as per current guidelines. A value for an FOB equivalent cargo of WTI Midland in the North Sea would be derived by a calculation of an evenly-weighted average of freight values for the five existing ports of Sullom Voe, Hound Point, Sture, Teesside, and Mongstad.

FREIGHT ADJUSTMENT FACTOR: Inclusion of CIF Rotterdam cargoes in Dated Brent would incorporate a freight adjustment factor in the calculation of equivalent FOB value for delivered cargoes. In order to introduce WTI Midland into Dated Brent, Platts proposes to apply a freight adjustment factor of 40% to cargoes of WTI Midland to give an FOB North Sea assessment, based on the average of freight rates for an equivalent loading period. The basis for this adjustment for WTI Midland would refer to an average of the basket of the five Dated Brent North Sea terminals. Platts currently applies a larger 80% freight adjustment factors to the existing grades within Dated Brent. Platts will review the weighting of the WTI Midland FAF after implementation.

Background on Platts Freight Adjustment Factors can be found here: https://www.spglobal.com/platts/plattscontent/_assets/_files/en/our-methodology/methodology-specifications/dated-brent-cif-rotterdam.pdf

VOLUME: Effective for cargoes for delivery from June 2023, Platts proposes to amend the size of cargoes reflected in Dated Brent and cash BFOE to 700,000 barrels. This size would be applicable to the five established grades of Brent/Ninian Blend, Forties, Oseberg, Ekofisk, Troll, as well as WTI Midland, each with a tolerance of 1%. As a result, Platts assessment of cash BFOE would reflect convergence of cash partials on reaching 700,000 barrels, an increase from the current standard of 600,000 barrels. This change would reflect the trend to larger vessel and cargo size in the Atlantic Aframax fleet. Platts has published a separate subscriber note outlining more detail on this change.

QUALITY: Platts proposes to include WTI Midland cargoes of a quality meeting its globally applied specification, as published Aug. 3, 2020, which is available here:

https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/080320-platts-to-implement-comprehensive-platts-wti-midland-specifications.

Platts will continue to reflect Oseberg, Ekofisk, and Troll in Dated Brent after adjustment on a Quality Premium basis. Platts proposes to review the applicability of a quality premium or any similar adjustment mechanism for WTI Midland cargoes in the Brent complex after initial implementation.

WTI MIDLAND INTO CASH BFOE: As part of this change, Platts proposes to reflect bids, offers, and transactions of Cash BFOE where the buyer is willing to accept a cargo of Brent/Ninian, Forties, Oseberg, Ekofisk, Troll, or WTI Midland on an FOB basis from cargoes loading June 2023. Under this proposal, on being nominated an FOB WTI Midland cargo a buyer should charter a vessel acceptable to seller and the nominated terminal, with title and risk passing from seller to buyer in international waters. Tolerance and shipping options should be retained by the buyer. Platts welcomes further feedback on the proposed chartering process.

Given a typical sailing time from US terminals to Rotterdam of 17 days, Platts proposes that a seller nominating a cargo of WTI Midland into a Cash BFOE position should declare the cargo in line with the established North Sea month-ahead nomination period, accounting for the equivalent sailing time from North Sea terminals to Rotterdam. In this way, a party declaring a WTI Midland cargo into cash BFOE should nominate a cargo one month ahead of the equivalent FOB North Sea loading dates. This date for WTI Midland cargoes would be established based on 17 days sailing after loading dates in USGC, less one day to account for the equivalent North Sea to Rotterdam transit time. This timing would typically allow the buyer around 13 days to fix an appropriate vessel for the FOB USGC lifting.

For example, for a cargo of WTI Midland loading FOB USGC on May 24-26, the assumed Rotterdam delivery date would be June 10-12, with an equivalent North Sea loading date of June 9-11, and a nomination date of May 9.

DATE RANGE FOR CASH NOMINATIONS OF WTI MIDLAND: In order to avoid slippage across cash months on transatlantic voyages, Platts proposes that nominations of WTI Midland into cash BFOE positions should not be made on cargoes that correspond to a North Sea cargo arriving in Rotterdam in the first seven calendar days and last seven calendar days of the month. The first cargo declarable in a cash month would be for delivery dates into Rotterdam on the 8-10th of the month, equivalent to a cargo loading 7-9 at FOB North Sea terminals.

FREIGHT COMPENSATION: For nominations of WTI Midland into a Cash BFOE position, Platts proposes to reflect bids, offers and transactions in which a seller would compensate a buyer for receiving an FOB USGC loading through a transatlantic freight adjustment. This freight adjustment would be calculated by taking the average daily difference between the Platts Cross North Sea Aframax freight rate (Platts symbol PFAKD10, evenly weighted for the five existing North Sea load locations) and the Platts Transatlantic Aframax freight rate (TDUCG00) across the next six common publishing dates following the nomination date.

WTI MIDLAND CARGOES AND TERMINALS FOR INCLUSION: Platts proposes to reflect in Dated Brent and cash BFOE assessments WTI Midland cargoes loading in the US Gulf Coast that meet the Platts specification which can be found here:

https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/080320-platts-to-implement-comprehensive-platts-wti-midland-specifications.

Additionally, Platts proposes only to reflect WTI Midland cargoes that can be loaded from pre-approved terminals. A terminal wishing to be included in the Brent assessment process would need to demonstrate the highest standards of logistical performance and guarantee a demonstration of the quality of crude oil for every loading. Approved terminals would be expected to provide a loading program of available cargo slots in line with those of North Sea terminals. Any prospective terminal would need to be approved for inclusion through a Platts review process before being involved in the assessment process. Platts conducts similar review for terminals reflected in other benchmark assessment processes.

WTI GRADE: WTI Midland is a light sweet crude oil with a typical average monthly export volume of 1.64 million barrels per day during 2021, of which over 750,000 b/d arrived in Europe. WTI Midland is typically sold into Europe on a delivered basis. Together with Brent/Ninian, Forties, Oseberg, Ekofisk, and Troll, the combined flow of light sweet crude including WTI Midland into the Northwest European market routinely exceeds 1.25 million barrels/day, a healthy volume of fungible crude oil grades for a robust benchmark. All feedback acknowledged that the addition of significant crude streams would be beneficial to the continued success of the benchmark There was broad consensus that WTI Midland constitutes a significant and stable stream of crude to European refinery centers.

Please send all comments, feedback and questions by March 28, 2022 to Platts_Oil_Feedback@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if they are not intended for publication by Platts for public viewing.

Platts will consider all comments received and will make those not marked as confidential available upon request.