The oil price assessment agency Platts may add two crudes to its Dubai and Oman benchmarks before July to meet rising physical demand for Middle East crudes as China prepares to launch its own Asian benchmark.
Platts, a unit of New York-based McGraw Hill Companies, is waiting for feedback before it can add Qatar’s Al Shaheen and Abu Dhabi’s Murban to its Dubai price reference. The Dubai assessment is the main benchmark used to price Middle Eastern crude shipped to Asia, the main consumer of oil from the region.
Platts’s Dubai assessment, which is based on trades done during a 30-minute window each day, is calculated from the value of three crude grades – Dubai, Oman and Abu Dhabi’s Upper Zakum.
“We have been looking at broadening the basket for Dubai and for Brent for about five years,” said Dave Ernsberger, global editorial director of oil at Platts. “The trigger for Platts [adding more grades to Dubai] was the amount of trading in the spot market rising in the last 18 months.”
Platts in September made a proposal to its subscribers to include the new grades of crude in the Middle East spot market and has started a formal consultation period for market feedback that will end on October 30.
Platts is seeking to improve the liquidity and quality of its Dubai benchmark as China, the world’s No 2 oil consumer, prepares to launch its own futures contract, a move that is set to shake up the oil pricing markets.
China, the world’s top buyer of crude, is hammering out an oil futures contract to be traded on the Shanghai International Energy Exchange or that could compete with London’s Brent and US’s West Texas Intermediate benchmarks.
“The biggest risk to Dubai losing its status as a benchmark is if doesn’t evolve and change,” said Mr Ernsberger. “There are so many competitive offerings.”
Al Shaheen and Murban were chosen from a number of other potential Middle Eastern grades because of their specifications, which match those of Dubai and Oman, he added.
“The goal with adding new crudes to the benchmark is to ensure that the closest possible match for these exciting crudes in the shape of the quality of the crude oil and the location of crude oils,” said Mr Ernsberger.
Bringing Al Shaheen and Murban to the Dubai basket could add between 600,000 barrels per day to the 1.2 million bpd in freely tradable crude.
Demand for spot Middle Eastern crude has risen, partly due to Chinese trading companies and refiners muscling in and buying spot Middle East crudes.
Chinese trading companies are cornering 25 to 30 per cent of spot Middle Eastern crudes, versus about 10 per cent three years ago.
“I actually think that their [China’s] impact on the Middle East spot crude market has grown much more quickly than their impact on other crude markets around the world,” said Mr Ernsberger.
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