The North Sea is home to Brent, a complex web of futures, derivatives and physical trading that’s central to the global oil market.
Dated Brent, the benchmark used to set two-thirds of global crude trades, will undergo the most significant change in its history in the coming days. From early May, WTI Midland will join the current basket of five North Sea grades — Brent, Forties, Oseberg, Ekofisk and Troll — that set the global benchmark.
The change will bring much-need liquidity into the benchmark, which for years has been suffering from shrinking supplies. Friday’s note brought clarity to one of the uncertainties that had been associated with the overhaul.
In determining benchmark prices, Platts will only assess bids, offers or trades from cargoes on board Aframax tankers that typically hold about 700,000 barrels of crude — soon to be the standard cargo size in the region. But almost 60% of US crude flows to Europe were transported by bigger tankers, such as Very Large Crude Carriers that can hold about 2 million barrels, according to data compiled by Bloomberg.
The guidance makes clear that a seller of WTI Midland can still charter a supertanker to haul its oil to Europe, which in principle then can conduct ship-to-ship transfers of the cargo onto three Aframaxes. Any of the cargoes will be allowed to be offered on Platts window as long as it meets quality criteria.
North Sea oil and gas resources are mostly tapped out and production has steadily declined since its peak more than 20 years ago. The iconic Brent facility, which once produced as much as half a million barrels a day, has been mostly dismantled. The only oil field to come online last year, called Evelyn, pumps no more than 6,000 barrels a day, just a 0.006% of global production.