Big traders of the U.S. WTI Midland crude, which is now part of the dated Brent benchmark, have used a ‘bookout’ option in the Platts window to reroute Europe-bound cargoes elsewhere, in a move that could influence the price of dated Brent, Reuters reported exclusively on Tuesday, citing trading sources and analysts.
The so-called bookout clause is allowed under the Platts methodology for commodities.
WTI Midland, produced in Texas, was included last year in the Dated Brent part of the Brent benchmark as one of several grades underpinning the contract. Dated Brent, the world’s leading benchmark price assessment, is being assessed by Platts. Apart from WTI Midland, Dated Brent includes Brent, Forties, Oseberg, Ekofisk, and Troll—all of these are crude grades produced in the North Sea.
According to the Intercontinental Exchange, Brent is the price barometer for about 80% of global crude.
The rerouting of U.S. cargoes initially bound for Europe could affect the price of Dated Brent, according to analysts who spoke to Reuters. The sale of cargoes to Europe creates the perception that demand in Europe is stronger than in reality, they added.
Yet Reuters has not established any conclusive link between the cargo trading activity and prices, it notes.
Platts told Reuters that it has not received any complaints about the rerouting of cargoes.
“Such contract amendments are typical in many markets,” Joel Hanley of S&P Global Commodity Insights told Reuters.
Platts doesn’t plan to retroactively change its assessments of Dated Brent if cargoes are booked out, Hanley added.
Some of the biggest independent oil traders – including Vitol Group, Trafigura, and Gunvor – have used bookouts of WTI cargoes from the United States traded into Dated Brent, anonymous trading sources told Reuters.
Asked to comment on the rerouting of WTI cargoes bound for Europe, a spokesperson for Trafigura told Reuters,
“As set out in the Platts methodology and is common across industry participants, we seek to agree requests from our buyers for additional discharge options where market forces dictate re-direction of cargoes.”
By Charles Kennedy for Oilprice.com
