S&P Global: WTI Midland now part of dated Brent; firm says change broadens liquidity without displacing North Sea grades
April 12, 2024 | Commodity Futures Trading Commission (CFTC), Independent Federal Agency, Executive, Federal
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S&P Global Commodity Insights told the CFTC's Energy and Environmental Markets Advisory Committee (EMAC) that WTI Midland has been incorporated into the dated Brent price assessment and related Brent-market instruments after a multi-year consultation process.
Richard Swan, who oversees oil price assessments at S&P Global Commodity Insights (Platts), said adding Midland required a delivery-based mechanism that values U.S. cargos in Rotterdam, then adjusts freight and freight equivalent so that Midland can be transposed to a hypothetical North Sea FOB loading point. "By enabling delivered Midland cargos into Rotterdam to be assessed, we can transpose that value back to a North Sea loading point," Swan said, summarizing the approach.
Swan said the change, effective for June 2023 cargos, expands the pool of crude grades underpinning dated Brent and has, in S&P's view, injected additional liquidity into the benchmark without "monopolizing" it. He described the technical steps required on the U.S. Gulf export side to ensure cargo provenance and predictable loading dates, and noted freight costs are reflected in delivered pricing rather than added later.
Committee members asked whether added shipping complexity or the need for specific cargo sizes would disadvantage smaller traders; Swan said buyers and sellers must have access to cargos to offer or bid and noted participation has broadened in Europe and Asia as a result. EMAC members also discussed how the addition interacts with Brent futures on ICE and the forward (cash) market; S&P Global representatives said the incorporation was coordinated across the dated, futures and forward components so the complex remains aligned.
No formal action was taken. EMAC members suggested future comparisons with other U.S. assessment methodologies (e.g., Argus) could clarify differences in how U.S. export grades are priced and referenced in international benchmarks.
Richard Swan, who oversees oil price assessments at S&P Global Commodity Insights (Platts), said adding Midland required a delivery-based mechanism that values U.S. cargos in Rotterdam, then adjusts freight and freight equivalent so that Midland can be transposed to a hypothetical North Sea FOB loading point. "By enabling delivered Midland cargos into Rotterdam to be assessed, we can transpose that value back to a North Sea loading point," Swan said, summarizing the approach.
Swan said the change, effective for June 2023 cargos, expands the pool of crude grades underpinning dated Brent and has, in S&P's view, injected additional liquidity into the benchmark without "monopolizing" it. He described the technical steps required on the U.S. Gulf export side to ensure cargo provenance and predictable loading dates, and noted freight costs are reflected in delivered pricing rather than added later.
Committee members asked whether added shipping complexity or the need for specific cargo sizes would disadvantage smaller traders; Swan said buyers and sellers must have access to cargos to offer or bid and noted participation has broadened in Europe and Asia as a result. EMAC members also discussed how the addition interacts with Brent futures on ICE and the forward (cash) market; S&P Global representatives said the incorporation was coordinated across the dated, futures and forward components so the complex remains aligned.
No formal action was taken. EMAC members suggested future comparisons with other U.S. assessment methodologies (e.g., Argus) could clarify differences in how U.S. export grades are priced and referenced in international benchmarks.
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