S&P Global Platts will launch daily assessments of US WTI Midland crude oil delivered ex-ship (DES) at two locations in Asia, effective October 1, 2019.
Platts will assess prices of WTI Midland cargoes DES Singapore, reflecting deliveries in Southeast Asia, and DES basis Yeosu, reflecting deliveries in North Asia.
At both locations, Platts will assess cargoes for delivery three months from the date of publication. For example, in October Platts will assess outright prices and premiums for WTI Midland cargoes for delivery in January.
The launch follows substantial growth in the supply of US crude to Asia and aims to meet the requirement for additional pricing information in what is becoming a key reference market.
Asia has become a key destination for US crude, accounting for 1.2 million b/d of total US exports of 2.7 million b/d in the first five months of 2019, according to data from the US Energy Information Administration. South Korea accounted for 29% of these flows and India 24%. Other prominent buyers include Taiwan at 15%, Thailand and China at 9% each and Japan and Singapore at 6% each.
While North Asian refiners are major end-buyers of US crude, Singapore is increasingly playing an important role in the trade for US crude exports to Asia owing, to its position as a logistics hub and a key reference point for ships plying between the two regions.
DES Singapore: In Southeast Asia, the Platts WTI Midland assessment will reflect cargoes for delivery DES Singapore. The assessment will reflect buyer's option to take delivery either at a Singapore terminal or by ship-to-ship (STS) transfer. Bids, offers and trades for other discharge ports may be published, and would be normalized to DES Singapore for the purpose of assessment.
DES basis Yeosu: In North Asia, Platts' assessment will reflect cargoes for DES delivery basis Yeosu. Platts assessment will reflect buyer's option to nominate discharge ports within Japan, Korea, Taiwan and China (JKTC), as per standard charterparty options, or alternatively to take delivery by ship-to-ship transfer.
Both DES Singapore and DES basis Yeosu assessments for WTI Midland will reflect cargoes for delivery over the full calendar month three months ahead of publication.
Buyers and sellers must provide a 10-day wide delivery window at the time of submitting their bids and offers to Platts for publication. Participants may submit bids or offers for delivery windows wider than 10 days, up to 15 days, with seller's option to narrow to a 10-day delivery window latest by 60 calendar days prior to the first day of the traded laycan. Sellers should narrow down to a 5-day delivery window 15 days prior to the first day of the 10-day laycan. Wider laycans may be normalized to the standard for assessment purposes.
DES Singapore WTI Midland assessments will reflect deliveries of 1 million barrels partially discharged from a VLCC, with +/-5% operational tolerance at seller's option.
DES basis Yeosu WTI Midland assessments will reflect deliveries of 2 million barrels discharged from a VLCC, with +/-5% operational tolerance at seller's option.
At both locations, bids, offers and trades for volumes up to 2 million barrels will be published during the Platts Market on Close assessment process and normalized to the respective standard.
For DES Singapore, participants must name at least one discharge port at the time of submitting their bids and offers to Platts for publication during the MOC process. Participants may also name additional discharge ports in their bids and offers. At the time of trade, buyers must declare the intended discharge port. Sellers should not unreasonably withhold buyer's request to nominate an alternative discharge port wherein the buyer agrees to cover any reasonable incremental delivery costs.
For DES basis Yeosu, buyers and sellers must name the basis port at the time of submitting their bids and offers to Platts for publication during the MOC process. Buyers may nominate delivery at any safe and sound alternative discharge ports within JKTC at a reasonable time prior to delivery, subject to payment of additional costs as per the charterparty contract for the vessel. Platts understands VLCC charterparty agreement for US crude shipments to North Asia typically include options for delivery at other regional ports priced as a lump sum freight differential to the basis port. Participants may submit bids or offers with non-standard charterparty options for publication, which may be normalized to the standard for assessment purposes.
Seller must name the delivery vessel either at the time of submitting their offer, or following a trade, nominate a vessel latest by 60 days prior to the first day of the 10-day delivery window. In offers with named vessels, the deal will be subject to buyer's acceptance of the nominated vessel. For offers with unnamed ship, the seller has the responsibility to meet the reasonable vetting requirements of a typical market participant in the discharge port nominated by the buyer at the time of trade. Seller may substitute the vessel with another meeting or exceeding the same approvals at any reasonable time before delivery of the cargo by providing a written notice to the buyer. In addition, the vessel must also meet physical limitations of the nominated discharge port including draft or beam restrictions, as well as conditions set by the country of destination.
Any substitution in vessel or discharge port should not financially harm the counterparty.
At both locations, Platts will publish assessments on an outright basis as well as differentials to the whole month average of Platts Dated Brent and Platts Dubai assessments during the month of delivery.
Starting October 1, Platts will also publish an Asia Dated Brent (ADB) Strip M3 assessment, reflecting the forward value of Dated Brent three months ahead of the date of publication at the 4:30 pm Singapore close (0830 GMT).
Platts will consider for publication bids, offers and trades on other pricing basis and may normalize them to the reference assessment basis.
Platts' standards around WTI Midland cargoes globally reflect crude originating from one of four pipelines along the US Gulf Coast: BridgeTex, Cactus, Longhorn and Seely-ECHO. The origin pipelines referenced in the assessments may be expanded or modified over time to reflect market-accepted sources of Midland-quality crude shipped directly from the Permian Basin as Texas' crude oil infrastructure evolves. For more details see: http://plts.co/U56K30pv36q. Platts will accept bids and offers for WTI Midland loading from other origin points, but these must be specified in the bid/offer terms and may be subject to normalization. All WTI Midland sold in the Platts MOC should not contain any previously cracked or refined material.
Counterparties in a trade reported during the MOC process must perform basis their typical bilateral trading and credit terms that have been applied and accepted by both counterparties in the open market.
The new assessments will appear in the Platts Crude Oil Marketwire, Platts Oilgram Price Report and on Platts Global Alert on page 2238 under the following price codes:
WTI Midland DES Singapore WTMSA00
WTI Midland DES Singapore vs Dated Brent WTMSB00
WTI Midland DES Singapore vs Dubai WTMSD00
WTI Midland DES Yeosu WTMYA00
WTI Midland DES Yeosu vs Dated Brent WTMYB00
WTI Midland DES Yeosu vs Dubai WTMYD00
ADB Strip M3 ADBS003
Please send all comments or questions to Asia_Crude@spglobal.com and firstname.lastname@example.org
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.