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Platts proposes specifications for WTI pipeline, cargo assessments

In response to market feedback, Platts proposes to amend its WTI pipeline and cargo assessments globally to reflect fungible physical specifications, effective July 27.

The specifications, which would address sulfur, mercaptans, density, and potentially other quality factors, would apply to the methodology for these assessments: WTI Midland (Platts symbol: PCACJ00), WTI Midland Month 2 (AAYZA00), WTI MEH (AAYRG00), WTI MEH Month 2 (AAXXE00), WTI FOB USGC (AAYBA00), WTI Midland DAP Rotterdam (AWTIC00), WTI Midland DAP Augusta (AWTIA00), WTI Midland FOB Scapa Flow (AWTIE00), WTI Midland DES Singapore (WTMSA00), and WTI Midland DES Yeosu (WTMYA00).

Platts understands the specifications proposed here provide the framework for a globally accepted WTI crude stream that is representative of a significant proportion of direct-from-Permian supply while meeting the needs of most refineries in typical US light, sweet crude export destinations.

For the global cargo assessments including FOB USGC, these specifications would overlay the existing pipeline provenance requirement, which stipulates that the assessment reflects unblended, uncracked crude transported from the Permian to the Gulf Coast on BridgeTex, Longhorn, Midland-to-ECHO I/II, Cactus I/II, EPIC, Gray Oak, or Permian Express. With this change, crude would have to originate from one of these pipelines in addition to meeting the new specifications.

With this methodology change, all WTI delivered against trades reported through the Platts Market On Close assessment process would be required to meet these specifications.

SULFUR: Platts proposes a sulfur limit of 0.2% by weight.

This limit coincides with market feedback about the usual threshold for direct-from-Permian Midland WTI versus US light, sweet crude transported from Cushing and/or that has been blended. Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average sulfur content of .15% for the last six months. Monthly average quality data reported by Enterprise Products Partners for WTI arriving at the ECHO terminal show average sulfur content of .14%.

MERCAPTANS: Platts proposes a mercaptans limit of 75 parts per million (ppm). Mercaptans are a naturally occurring organic sulfur compound present in many crude oils. Market feedback indicates WTI has seen increasing absolute levels and variability in mercaptan content with recent expansion into new acreage, presenting a quality challenge for some refineries. Platts understands that certain refineries are sensitive to mercaptan levels and specify limits in their procurement processes, though others buy WTI with no specified mercaptan limit. Industry feedback suggests Platts' proposed 75 ppm limit would allow a strong majority of global refineries to accept this crude stream, while also including a significant proportion of WTI Midland supply.

API: Platts proposes a density minimum of 44 API and density maximum of 38 API.

Industry feedback indicates this range captures virtually all direct-from-Permian WTI and provides significant headroom for heavier batches, given that the WTI stream has become lighter over time. Feedback indicates there is little concern on the part of buyers about heavier WTI insofar as sulfur remains low.

Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average density of 41.2 API for the last six months. Monthly average quality data reported by Enterprise Products Partners for WTI arriving at the ECHO terminal show average density of 43.0 for the last six months.

BASIC SEDIMENT AND WATER: Platts invites feedback as to whether a basic sediment and water limit (BS&W) would contribute to establishing a fungible, global WTI grade, and what that limit should be.

Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average BS&W of .07% for the last six months. Monthly average quality data reported by Enterprise Products Partners for WTI arriving at the ECHO terminal show average BS&W of .06% for the last six months.

IRON: Platts invites feedback on if an iron limit would contribute to a establishing a fungible, global WTI grade, and what that limit should be.

Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average iron content of 5.32 ppm for the last six months. Since the terminal began reporting the data in October 2018, iron content has averaged 5.42 ppm with a range of 3.2 to 9.0 ppm.

NICKEL: Platts invites feedback on if a nickel limit would contribute to a establishing a fungible, global WTI grade, and what that limit should be. Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average nickel of 0.43 ppm for the last six months. Monthly average quality data reported by Enterprise Products Partners for WTI arriving at the ECHO terminal show average nickel of 0.39 ppm for the last six months. VANADIUM: Platts invites feedback on if a vanadium limit would contribute to a establishing a fungible, global WTI grade, and what that limit should be.

Monthly average quality data reported by ICE for WTI arriving at the Magellan East Houston Terminal via BridgeTex and Longhorn show average vanadium of 0.45 ppm for the last six months. Monthly average quality data reported by Enterprise Products Partners for WTI arriving at the ECHO terminal show average vanadium of 0.42 ppm for the last six months.

OTHER CRUDE COMPARISON TESTS: Platts invite feedback on whether it should include a specification related to crude composition such as 20%, 50%, and/or final boiling point distillation temperature.

Platts recognizes that the WTI crude stream continues to evolve as existing reservoirs are depleted and as producers move to new acreage. Platts will monitor reported quality data in addition to gathering market feedback to ensure these specifications continue to reflect a globally relevant, fungible WTI stream that balances supply availability with buyer requirements. Future specification changes are possible following a proposal and feedback period. Please send any comments or feedback on this proposal by July 17, 2020, to americas_crude@spglobal.com and pricegroup@spglobal.com.

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.