Platts Revamps Brent Oil Benchmark for First Time in a Decade

Commodities Reuters

Oil pricing agency S&P Global Platts said on Monday it was making the first major overhaul of its Brent oil assessment in a decade to address falling supply underpinning the benchmark that prices most of the world's oil.

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A decline in supply from North Sea fields has led to concerns that physical volumes could become too thin and hence at times could be accumulated in the hands of just a few players, making the benchmark vulnerable to manipulation.

Platts said on Monday it would add Norway's Troll crude to the four British and Norwegian crudes it already uses to assess dated Brent from Jan 1. 2018. This will join Brent, Forties, Oseberg and Ekofisk, or BFOE as they are known.

"Overall we have had significant support for the addition of a new grade to the basket," Jonty Rushforth, global editorial director for S&P Platts Global's oil and shipping price group, said at an industry conference.

"Far and away, Troll has received the most support."

Brent is used to set the price of billions of dollars of daily oil trade though a forward market for BFOE crude cargoes, swaps markets, physical benchmark dated Brent and Brent crude futures.

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Supply of the four BFOE grades is expected to fall next month to a rate of 884,000 barrels per day (bpd), from February's originally planned 943,000 bpd rate, based on loading programs from trading sources.

This will be the smallest program since November.

Typically, Troll produces about 10 to 15 cargoes of 600,000 barrels each per month. Platts said its inclusion should boost volumes by about 20 percent, helping to improve liquidity.

Troll, a light, sweet crude, is operated by Norwegian state producer Statoil, which also contributes to the Oseberg, Statfjord, Gullfaks, Grane and Asgard streams.

The last change to the dated Brent benchmark was in 2007 when Platts added Ekofisk, a light, sweet crude produced jointly by British- and Norwegian-owned fields.

Platts added Oseberg and Forties, a slightly heavier, more sour grade, to the basket in 2002.

In an earlier move to boost liquidity, Platts began to apply quality premiums to two better-quality crudes - Oseberg and Ekofisk - to encourage delivery of these into contracts. There are no plans yet to apply one to Troll.

"The market appreciates a measured response in terms of changes," Rushforth told a media briefing. Platts will be sticking with the BFOE name.

Thomson Reuters, parent of Reuters news, competes with Platts in providing news and information to the oil market. (Additional reporting by Amanda Cooper; Editing by David Clarke and Mark Potter)