APPEC: Vitol calls on Platts to solve Brent puzzle with WTI, not Johan Sverdrup

27 Sep 2021

Quantum Commodity Intelligence – The world’s largest independent oil trading house has called on S&P Global Platts to resolve future illiquidity in its flagship oil benchmark by broadening it to include US sweet crude and not European sour.

Speaking at S&P Global's APPEC conference, Vitol’s CEO called on the publisher of the Dated Brent benchmark to include WTI Midland into its assessment process instead of using heavier Norwegian grade, Johan Sverdrup.

“Our view is pretty clear, we regard the benchmark as a sweet benchmark. We regard WTI as a pretty adequate crude substitute for many of the grades that are currently in the benchmark. We very much prefer a WTI-related solution,” Hardy said.

S&P Global Platts, which is the world’s biggest price reporting agency, currently allows Brent, Forties, Oseberg, Troll, and Ekofisk to set its Dated Brent benchmark – the main international crude benchmark that is relied on by refiners to buy oil.

But volumes are in decline, and in February Platts proposed adding WTI Midland as a Dated Brent delivery grade, but more controversially change the basis of Dated Brent to CIF Rotterdam, rather than the long-standing basis FOB North Sea.

Plans to shift the benchmark to a destination basis have since been scrapped after industry opposition, but in July Platts said it was considering either adding the 755,000 bpd Johan Sverdrup stream to the assessment process or including sweet WTI Midland crude loading from the US Gulf.

The main objection to Johan Sverdrup is its quality, which at 28 API gravity is much heavier than current North Sea benchmark grades, meaning it is more fuel oil heavy and likely to have different pricing dynamics.

Vitol’s Hardy said Monday he was in favour of the former, adding that Vitol’s refineries would not be able “to touch Johan Sverdrup” from a quality point of view.

“Dated, the market for Brent, I think, would be better served by expanding it with sweet alternatives rather than a sour alternative, which we ultimately think would not be the slipper on Cinderella’s foot,” he said.

Vitol’s statement comes after rival oil trader Trafigura said earlier this year that WTI Midland would be a good solution to solving future liquidity issues.

S&P Global Platts is currently consulting with stakeholders and the deadline for comments closes on 30 September.