BP: Brent Benchmark Reform Should Include U.S. Oil, Dump Brent

December 7, 2021

Credit: kristoffer steffenburg/EyeEm/AdobeStock
Credit: kristoffer steffenburg/EyeEm/AdobeStock

BP supports the addition of U.S. oil crude grade WTI Midland to global dated Brent, suggesting the removal in the medium-term of Brent and Forties grades from the benchmark as flows have evaporated, according to a document seen by Reuters.

Dated Brent, the S&P Global Platts benchmark set up over 30 years ago, is vital to the global oil system as it is used to price around 60% of the 100 million barrels a day (bpd) crude oil trade.

BP also said in the document that it did not support the idea of adding Norway's huge Johan Sverdrup field to dated Brent because it was a more sour grade of crude. Platts had said in July that industry opinion was focused on the possible addition of WTI or Sverdrup.

Its comments echoed those made in September by oil trader Vitol.  

Oil pricing agency S&P Global Platts and Intercontinental Exchange (ICE), the home of Brent futures trading, have held discussions on the benchmark, after an earlier Platts proposal to include WTI was delayed because of industry pressure.

"BP strongly believes that the inclusion of WTI Midland, executed correctly, is the best solution for enhancing liquidity, retaining Brent as a well-supplied and trusted light, sweet benchmark," it said.

BP did not immediately reply to a request for comment.

Dated Brent is currently based on five North Sea crudes - Forties, Brent, Oseberg, Ekofisk, and Troll - but those supplies are in long-term decline.

"BP also believes that in the medium-term Forties and Brent will need to be removed from the benchmark as their values become increasingly difficult to assess due to their reducing volumes," according to the document.

BP discovered the Forties field in 1970 and Royal Dutch Shell Brent one year later, together laying the cornerstones of North Sea oil production for decades to come.

A lot of the infrastructure around the original Brent oilfield is now being decommissioned. Production at the Forties field has dwindled to about 20,000 bpd, government data shows. But other fields have been added to boost the two streams over the years.

Platts had said in February it would add WTI Midland and change the basis to a delivered one or CIF, where cargoes include insurance and freight costs, rather than free on board. But in March it said it had deferred the move due to industry pressure.  

A Platts consultation on the issue ended on September 30. Platts said it had no comment on the document.

"We respect the right of all market participants to express their views publicly, as was the case with BP today," it said.

Reuters competes with Platts in the provision of news and pricing information about the oil market.

(Reporting by Julia Payne; Writing Shadia Nasralla and Alex Lawler; Editing by Louise Heavens and Emelia Sithole-Matarise)



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