According to foreign media reports, Brent crude oil, the international benchmark for measuring oil prices, is likely to undergo a comprehensive reform to reflect the role of U.S. oil exports in global energy markets. growing importance.
By March 2022, S&P Global Platts may begin to draw on crude pumped near Midland, Texas, to set its Dated Brent crude price, a metric that has historically reflected the European North Sea. Physical crude oil prices.
S&P Global Platts has begun consulting market participants on the proposed changes on Thursday and plans to complete the review by February next year.
The Dated Brent crude price set daily by Platts is crucial to the global oil market . The oil price indicator functions similar to what the interest rate benchmark Libor did in its heyday, or what the 10-year U.S. Treasury yield did in global credit markets.
Since the late 1980s, Brent crude oil has been the benchmark for pricing most global crude oil transactions. It also helps determine the price of Brent crude futures contracts that oil producers, commodity traders and investors buy and sell on the Intercontinental Exchange (ICE) market.
However, Brent crude has been facing a major problem for years. Brent crude oil extracted from the ground in the East Shetland Basin off the coast of Scotland is rapidly depleting. In response, Platts included different types of crude oil from the North Sea in its calculations. Benchmark Brent has evolved into a basket of crudes that includes not only its namesake Brent but also Forties, Ekofisk, Troll and Oseberg crudes. But supplies of other North Sea crudes are also shrinking along with Brent.
This has led to a situation where the trading price of most crude oil globally is determined by reference to a rapidly shrinking market. The proposal to incorporate West Texas Intermediate crude into Brent crude aims to address this issue and create a benchmark that better reflects the realities of the underlying oil market. This highlights the rapid emergence of the United States over the past five years as a key and volatile oil supplier to the world.
Since the 40-year-old U.S. oil export ban was lifted in 2015, the United States has imposed restrictions on Europe and other countries. Crude oil exports from the region have surged, helped by the rise of shale oil technology.
Jonty Rushforth, senior director at Platts Energy, said: “Over the past few decades, the North Sea has transformed from a core production area to a core trading area, where you can import, export and consumption. U.S. exports have become the mainstay of Europe.”
The U.S. oil and gas industry has been hit hard by a slump in energy demand due to the new coronavirus pandemic, which has bankrupted dozens of smaller oil producers and led to Exxon Mobil ( Exxon Mobil Corp. and Chevron Corp. slashed spending plans this week. However, the United States is expected to remain a major crude oil producer and exporter in the coming years.
Adi Imsirovic, a senior fellow at the Oxford Institute for Energy Studies, said, “There is no reason why WTI crude oil cannot be used for Brent crude oil. Brent crude oil urgently needs to obtain more liquidity because we are on the verge of Those key levels.”
Others are skeptical that the revamp will provide a more reliable reference for oil prices.
Liz Bossley, CEO of Consilience Energy Advisory Group Ltd. and a former North Sea trader, said, “Brent was a great tool at the time, but now it’s tied up with duct tape and gum.” “This It’s another piece of gum,” she said of WTI crude’s potential ingredients.
She favors the creation of a completely new benchmark.
</p
