Platts, a unit of McGraw Hill, will assess cargoes loading in the next 10-25 days in working out the price of dated Brent as of Jan. 6 next year, four more days than allowed for at present. It also plans to assess cash Brent cargoes 25 days ahead, instead of 21 days at present.
The change will boost liquidity following a steady fall in supplies of the North Sea crude streams used to set the dated benchmark — Brent, Forties, Oseberg and Ekofisk — also known as BFOE.
“We believe these changes are necessary to maintain the quality of the Brent price assessment,” said Dan Tanz, Platts’ vice president for editorial. “Four more delivery days will allow the assessment process to potentially capture more than 30 percent of additional supply.”
The date is in line with Platts’ original plans announced in July, despite a proposal from Royal Dutch Shell, a big North Sea trader, for the changes to be delayed until 2013.
Oil traders have said Platts’ action is inevitable to address the impact of falling supplies on the dated Brent quote, which is used to price up to 70 percent of the world’s physical oil. North Sea Brent is the underlying market for Brent crude futures.
The decline has been temporarily exaggerated since May by delays to cargoes of Forties — the largest of the BFOE streams and the one that usually sets the dated Brent quote — because of problems at Nexen’s Buzzard oilfield.
“Recent events in the market, including disruptions to the Forties pipeline system and shortfalls in cargo deliveries, show clearly that timely action is needed to maintain the strength of the physical benchmark,” Tanz said.
The Forties delays have prompted some analysts to question the credibility of Brent as a global benchmark, since a relatively small amount of crude affects prices around the world, and to say that Brent is more prone to being squeezed.
In a statement, Platts said there was support from the industry for other changes, including the possible use of more crude grades.
“Platts has received further strong support for the potential use of escalators for the lighter crude grades currently reflected in the Brent assessment, and for including additional grades,” it said. “Platts plans to begin discussions regarding these potential enhancements.”
