Following market consultation, S&P Global Platts is amending the methodology for its gasoline, naphtha, gasoil, jet fuel/kerosene and fuel oil FOB Arab Gulf benchmarks to ensure they consistently reflect demonstrable values for Middle East product markets.
Platts had previously assessed the benchmark Middle East netback prices for gasoline, gasoil, jet/kerosene and fuel oil only by deducting relevant freight costs from the respective FOB Singapore assessments and for naphtha by deducting freight from C+F Japan assessments.
Details of the assessment methodology and netback calculations can be found at: http://plts.co/N5hJ30qCT0D
In light of the recent sharp declines in refined oil product prices and a surge in freight rates, Platts opened a consultation process to review the methodology for its Middle East netback assessments in a subscriber note published May 4: http://plts.co/g2nc30qFzok
Platts understands that further declines in the FOB Singapore or C+F Japan base prices, increases in freight rates, or a combination of both could result in the netback calculations producing a value at or below zero.
Effective immediately, Platts will only publish a zero or negative value for these benchmarks if prevailing market information demonstrates such values. This will mean that if a freight netback calculation would produce a value at or below zero, then Platts would consider relevant spot market information instead and use this in its assessment of FOB Arab Gulf values.
Under this change, Platts would consider all gasoline grades together, all gasoil grades together, and all fuel oil grades together. This would mean that if the netback calculation for any grade of gasoline would produce a value at or below zero, all grades of gasoline would be assessed based on spot market information.
Platts would also consider all naphtha cargo sizes together, all jet fuel/kerosene cargo sizes together, and all gasoil cargo sizes together. This would mean that if the netback calculation for any cargo size of jet fuel/kerosene would produce a value at or below zero, all cargo sizes of jet fuel/kerosene would be assessed based on spot market information.
The MOPAG outright assessment would reflect the existing spot differential (premium/discount) assessment of the product to its MOPAG strip value. The strip reflects the average of daily swap values over a 21-day period between 20-40 days from the day of publication.
The MOPAG derivatives assessments and values are based on trades seen in the Platts Market on Close assessment process or on derivatives exchanges or heard in over-the-counter markets. Platts will also take into consideration physical bids, offers and trades on an FOB Arab Gulf basis in the MOC process. In the absence of any bids, offers or trades, Platts will take into consideration the respective Singapore derivatives coupled with freight netback and forward freight agreement values.
If spot market values for any product in the Middle East are demonstrated by firm, transparent market information at or below zero, Platts would reflect this in the final assessment.
Platts already assesses spot market values for gasoline, gasoil, jet fuel and fuel oil in the Middle East on an FOB Fujairah basis, reflecting bids, offers and trades heard in the broader market and reported in the MOC process. Details of these assessments are also available at the link above.
The following FOB Arab Gulf netback assessments, published in Asia-Pacific/Arab Gulf Market Scan and Platts Global Alert pages 2004 and 2018, will be affected:
Naphtha ($/mt) PAAAA00
Naphtha LR2 ($/mt) AAIDA00
Gasoline 95 unleaded AAICY00
Gasoline 92 unleaded AAGJA00
Kerosene LR2 AAKNZ00
Gasoil 10 ppm AAIDT00
Gasoil 0.005% sulfur AASGJ00
Gasoil 0.05% sulfur AAFEZ00
Gasoil 0.25% sulfur AACUA00
Gasoil LR2 AAKBT00
HSFO 180 CST ($/mt) PUABE00
HSFO 380 CST ($/mt) AAIDC00
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.