Global crude markets are changing at an unprecedented pace. Across all key oil producing regions, markets look vastly different today than they did even three years ago, and it has become increasingly clear to participants that the industry itself is in a period of great flux.
Most notably, these changes can be traced back to two primary events: the shale oil revolution in the United States and the subsequent lifting of the effective export ban and, on the other side of the world, China’s continual and growing demand for crude oil.
As a result, the crude markets – historically defined by flows that moved largely in one direction –have seen the development of a complex web of multi-directional flows.
This has served to put the European market in a unique position and has, in many respects, further underscored the importance of Dated Brent in global crude pricing. Europe, acting as both a crude export region in addition to its traditional role as a crude import region, is particularly well-positioned to straddle both the US and Asian markets.
Dated Brent increasingly factors in to pricing decisions made beyond the Atlantic Basin. Asian buyers rely on it to determine the volume of crude they are looking to bring in not just from the North Sea, but also from West Africa, and Urals from Western Russia. Similarly, US sellers are looking to Dated Brent to gauge how much of their local production should flow West, rather than East.
On the back of its ever-evolving importance in global crude trading and pricing, Dated Brent itself is facing a period of evolution. The Dated Brent basket is likely to see further additions beyond Troll in the coming years as production in the region continues to evolve and, as part of that, there are likely to be further careful quality reviews. The largest projects in the region – particularly Norway’s huge Johan Sverdrup field, set to begin the first phase of production in late-2019 – are of a significantly different quality to the existing basket. Meanwhile, production at the light, sweet fields that currently make up the BFOE basket is continuing to fade. There is also an opportunity for the benchmark to evolve in other ways, possibly bringing in grades from outside the region on a delivered basis. Such options are already being discussed in the market and Platts invites all market participants to share their views and actively engage in shaping the future of Dated Brent in an ever evolving global crude complex.
In this special report we cover the challenges and opportunities facing what is widely regarded as the world’s leading crude oil benchmark. Dated Brent has seen an exciting evolution over the years, always adapting to the changing physical and financial landscape, and the signs are that it’s not over yet.