On 21 July 2021, S&P Global Platts (Platts) and ICE published a joint white paper and launched simultaneous consultations on the evolution of the Brent complex, which includes Dated Brent, Cash Brent, and ICE Brent Crude Oil futures.
The paper, co-authored by Platts and ICE which oversee, respectively, the Dated Brent physical benchmark price assessment and the ICE Brent Crude Oil futures contract, provides an overview of options for adding additional deliverable crude oil to the Brent complex and outlines a number of key issues and questions as it seeks market feedback.
Ongoing discussions conducted separately by Platts and ICE have demonstrated that industry opinion has focused specifically on two possible streams of crude to become part of Dated Brent. The first is Johan Sverdrup as a deliverable option under the Forward Brent contract, which would remain on a Free on Board (“FOB”) basis. The second is West Texas Intermediate (WTI) Midland, which would be a deliverable grade on an FOB USGC basis.
These consultations will consider the need to bring additional deliverable crude oil into the Brent complex, and the required changes needed to ensure continued connectivity between Dated Brent, cash BFOE and Brent futures.
Platts and ICE have announced market consultations through Platts’ Subscriber Notes and ICE’s Circular to solicit feedback. All interested parties are encouraged to provide feedback and to put forward any further relevant items through the respective consultation feedback channels. The deadline for comments is September 30, 2021.
Identified Issues and Questions
This paper discusses a common set of identified issues and questions. These are included in the following section, which is an extract from the full paper.
This option would involve adding Johan Sverdrup, and only this grade, as a deliverable option under the Forward Brent contract, which would remain on an FOB basis, and for bids and offers of this grade to be factored into Dated Brent assessments.
- Johan Sverdrup is a materially heavier and higher sulfur grade than those in the existing Brent basket. As the market is accustomed to quality adjustments, is adding a heavier, sourer grade an issue and what are the challenges for the complex that this represents? Similarly, how much of an issue is it that a large proportion of Johan Sverdrup production is exported to the East?
- It would appear that the volatility between the value of Johan Sverdrup and the existing Brent basket grades is higher than the volatility between the relative values in the existing Brent basket grades. How could this volatility be managed?
- For how long would additional volume from Johan Sverdrup maintain sufficient underlying physical oil for the Brent complex? Current Johan Sverdrup production capacity is 535 kb/d; the completion of Phase 2 development of the field, targeted for the fourth quarter of 2022, is planned to increase production capacity to 720 kb/d.
- Is there any further volume in the North Sea that could be incorporated in the future, were the Brent quality band widened through the introduction of Johan Sverdrup?
- What other specific issues with this option need to be addressed?
This option could involve the Forward Brent contract remaining an FOB contract but adding WTI Midland as a deliverable grade on an FOB USGC (to be more closely defined) basis.
Were WTI Midland a deliverable grade within the Brent complex as an FOB US
Gulf Coast loading, should this be on the basis of loading dates that match
the current forward Cash BFOE month or should it be on the basis of dates
that are lagged to allow for the difference in journey time to Rotterdam?
For example, for a July contract, would FOB USGC loadings from July 1 to
July 31 be declarable, or loadings from June 20 to July 19?
If such a time slippage is to be adopted, how long should it be? It could be
by a time equal to the additional voyage time from the USGC to
Rotterdam, as compared to the voyage time from the North Sea to Rotterdam.
This is assuming 17 days sailing time from USGC to Rotterdam and one day
sailing time from Sullom Voe to Rotterdam.
If such a time slippage was to be adopted, should the notice required for
nominating a WTI Midland delivery similarly be adjusted so that cargoes of
different grades would be nominated with the same effective period in
advance of their expected arrival in Rotterdam? For instance, a notice
period of 30 days could be retained for the 3-day loading ranges of all
North Sea grades. A shorter notice period of 15-20 days could be required
for nominating FOB WTI Midland deliveries; this would be in order to
accommodate USGC pipeline schedules and their impact on subsequent FOB
loading schedules, which would allow WTI Midland cargoes to then be
deliverable into a Brent forward contract.
The addition of WTI Midland on an FOB USGC basis would require the addition
of a freight adjustment to address the incremental freight costs to bring
WTI Midland to Rotterdam versus bringing a North Sea barrel to Rotterdam.
How should this incremental freight cost be calculated? Over what time
period, and based on what baseline freight rates?
In their respective discussions, Platts and ICE have heard that several
market participants are reluctant to take risk and title to crude in US
territorial waters for taxation or environmental risk reasons. Would it be
possible, and desirable, to address this by one of the following options?
When calculating the incremental freight, should it be based on the
specific USGC load port nominated (e.g. Houston or Corpus Christi) or an
average of the USGC ports that load Aframax-size vessels?
When calculating the incremental freight, what North Sea freight leg
should be used? Given the majority of Dated Brent terminals are two days’
voyage from Rotterdam, would a proxy port of Hound Point be appropriate?
Over what period should the incremental freight be calculated? Should it
The average of M-2, meaning the seller will know the economics of
supplying WTI Midland into the Forward Brent contract at the time to
associated Futures contract expiries?
A period linked to actual loading dates nominated FOB USGC and
reflecting the typical vessel fixing window, e.g. three or four days
falling around ten days before the first day of the loading window. This
would leave the seller exposed but give the buyer greater comfort
regarding the relative landed cost versus the other grades in the
If the Forward Brent contract is amended to include WTI Midland as
deliverable grade on an FOB USGC basis, how would this best be reflected in
the Dated Brent benchmark? Is it practical from a timing perspective to have
‘Dated’ FOB USGC WTI Midland offers or would it be better to only allow WTI
Midland offers to be considered when assessing Dated if they are offered
delivered Rotterdam? If so, should it remain on an FOB North Sea basis with
delivered Rotterdam WTI Midland offers only being considered after netting
them back to a notional FOB North Sea value, as is Platts current practice?
If FOB USGC WTI Midland is made a deliverable grade within Cash BFOE should
all WTI Midland load locations be included or just a subset? What criteria
should be applied for any subset?
Amending for WTI Midland deliveries into the Forward contract the standard
FOB terms such that risk and title pass not at loading but as the
performing vessel leaves US territorial waters;
Allowing in the event of a WTI Midland nomination into a Forward Brent
contract both the seller and the buyer to substitute an alternative,
related, legal entity as the performing company. For example, a trade
between X(UK) Ltd and Y B.V. could allow, should X nominate a WTI cargo
for X to substitute X(US) Ltd as the performing entity and Y to substitute
- Are there other potential solutions to this issue?
What other specific issues with this option need to be addressed?
Characteristics of the loading terminal, such as draft, air draft or other
dimensional restrictions. What min/max characteristics, or other
requirements, would you suggest?
The typical export quality from the terminal, as this varies from terminal
- Crude from any terminal that is:
- Of Midland origin only
That meets the strict quality specifications of Midland-origin WTI
The willingness of the terminal to issue a loading program, assign parcel
numbers and deal with program amendments in a similar manner to the
relevant North Sea terminals (e.g. the relevant North Sea terminals try
and avoid slipping parcels out of a month during the period from the end
of M-2 and the end of M-1 – i.e. after the date when liquidity in the
month M contract dries up and before the last date a month M cargo can be
nominated against a Forward month M sale);
- Some combination of a, b, c, and d above.
Is it a relevant consideration if the loading dock is a public or private
In addition, in their respective discussions, Platts and ICE have heard feedback that a further beneficial change, in conjunction with the above, could be to increase the parcel size in the Brent complex from 600,000 barrels to 700,000 b. This would align with the typical minimum parcel size for WTI Midland exports. It would also align with the larger Aframax-sized vessels that have become more prevalent in the wider crude oil market in recent years.
- Should the complex move to a larger size parcel, and if so to what volume?
- Are there particular markets, or buyers, which could be adversely affected by such an increase and how significant are they?
- Would such a larger parcel size make it easier or harder to combine parcels into VLCC loadings?
- Are there any physical or contractual restrictions at any of the loading terminals for Brent, Forties, Oseberg or Troll that would preclude such a change or require a notice period for such a change to be introduced and if so for how long?
- Are there any other issues not covered in the questions above which would need consideration before such a change was adopted?
Platts and ICE have published consultation notices through their respective Subscriber Notes and Circulars channels to solicit feedback.
Written comments received by either Platts or ICE in response to this paper will be shared between both parties, unless marked clearly as solely for the view of one of them.
Additionally, written comments may be published by Platts or ICE or made available to third parties upon their request, unless clearly marked as not intended for publication.