Oil price assessment service Platts, a unit of McGraw Hill, proposed in July to tweak the way it calculates its dated Brent price — a benchmark used to price crude cargoes around the world — as of January 2012.
The change would boost liquidity following a steady fall in supplies of the North Sea crude streams used to set the dated benchmark — Brent BFO-E, Forties FOT-E, Oseberg BFO-OSE and Ekofisk EKO-E — also known as BFOE.
Shell’s trading arm, known as Stasco, said that while it supported the Platts proposals, the adjustment would require other changes which should all be implemented at the same time. Shell proposed the amendments be made in the first quarter of 2013.
“In our opinion the changes proposed by Platts are of material significance to the market,” Stasco said in a letter dated Aug. 10 and posted on the company’s website.
“Shell ...has a particular interest in ensuring that any change to Brent will be implemented in a way that causes minimal market disruption.”
Shell is custodian of the terms which govern BFOE trading, known as the SUKO 90 contract.
It is also operator of the North Sea Brent oilfield that was the original source of crude for the Brent contract.
One of the changes Platts suggested was basing its dated Brent price assessment on cargoes loading 10-25 days ahead, from 10-21 days ahead at present. It proposed going ahead as of Jan. 6, 2012.
Platts also suggested a change of the BFOE cash crude market, also taking place on that day, to cargoes loading 25 days in advance instead of 21 days.
Shell said it supported both proposals but making the changes meant the monthly loading programs for the BFOE crudes, which buyers and sellers use to plan supplies, would need to be issued about five days earlier.
The dozens of partners in the BFOE crudes are being asked to consider issuing programs earlier, Shell said.
At present, they are released around the 10th of the preceding month.
Shell also said the expiry date of Brent crude futures would need to be shifted so that it falls into line with the changes in the physical market assessment.
"Shell proposes that the most appropriate time for both implementation of the proposed (dated) Brent and BFOE changes and the advancement of the Brent futures expiry date should be concurrent and during the first quarter of 2013,” it said.
Brent futures trade on the IntercontinentalExchange and currently expire around the middle of the month.
The decline in supplies of BFOE oil has been temporarily exaggerated this year by delays to cargoes of Forties due to problems at Nexen’s Buzzard oilfield, which irritated traders and boosted prices.
Shell, looking ahead to prepare for a further decline in North Sea output, also proposed that starting in 2016 at the latest, the Brent futures expiry be moved to the last business day of the month two months prior to the futures contract.
“Early consensus on this could pave the way for a synchronized change of the Platts assessment window for dated Brent and BFOE from 25 to 30 days from that date,” Shell said.
Shell also said it saw merit in the use of escalators for the lighter crude grades in the BFOE basket, an issue Platts said in July it was looking into but not making a specific proposal on.
Thomson Reuters competes with Platts in providing information to the energy markets.
