Shell amends SUKO 90 trading terms to allow WTI Midland crude on CIF basis

Shell announced May 23 amendments to its SUKO 90 terms governing forward trades of Brent-Forties-Oseberg-Ekofisk-Troll allowing 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.

The move comes as S&P Global Commodity Insights looks to reflect cargoes of WTI Midland crude oil in its Platts Dated Brent crude oil benchmark, which underpins the majority of global oil pricing. S&P Global is also proposing to include WTI Midland in cash BFOE and all related assessments.

Shell's new SUKO 90 terms for trading in the forward Cash BFOE market differ from the proposal by S&P Global, however, which is based on WTI Midland crude nominations from the US Gulf Coast on a free-on-board (FOB) basis, although no decision from S&P Global has been made.

When goods are bought or sold on a "Cost, Insurance, and Freight" (CIF) basis, the seller is responsible for delivery of the goods to a ship, loading the goods onto the ship, and insuring the shipment until it reaches the port of destination. Under the existing terms of SUKO 90, all cash BFOE nominations are done on an FOB basis, meaning the buyer of a cash cargo charters the vessel.

Since announcing proposals to include cargoes of WTI Midland crude oil in its Platts Dated Brent benchmark last year, S&P Global has said it is aware that a new set of trading terms would be required to underpin Cash BFOE deals on a delivered basis and has set up an industry working group to define the core contractual terms.

S&P Global has said it will reflect cargoes of WTI Midland crude oil in its existing Dated Brent CIF Rotterdam assessment, with effect from July 2022 cargo deliveries.

The SUKO 90 trading terms were first published in 1990 to govern the then 15-day Brent market but have since gone through a number of adaptations to incorporate new grades, cargo sizes and date ranges as the market has evolved.

Shell said its new terms will allow for the North Sea loading terminals Sullom Voe, Hound Point, Sture, Teeside and Mongstad to publish 700,000 and 600,000 barrels cargoes in their loading programs. Once the five terminals have indicated their preferred cargo size for June 2023 onward, Shell said it will publish its 2023 amendments to SUKO 90 in line with terminals' chosen cargo sizes.