Platts to Include More Arab Grades into Pricing Benchmarks

Platts to Include More Arab Grades into Pricing Benchmarks

Oil pricing agency Platts is expected to announce by the end of this year which of two Middle East crude grades it will add to its Dubai benchmark in 2016 to boost the liquidity of its price assessment process, reported Reuters.

The agency also said it would provide updates on the possible inclusion of Qatar’s Al-Shaheen and Abu Dhabi’s Murban to the Dubai and Oman benchmarks, with the possible implementation of a quality premium for deliveries of Murban.

“Obviously, (adding crude) makes the benchmark more liquid which is the main issue currently. So it’s a step in the right direction,” said a trader with a Western oil company who declined to be named.

One of the reasons Platts took this decision, reportedly, was the growing influence of Chinese buyers. Thanks to record trading by Chinese state companies in August, during the Market-on-Close (MoC) process, liquidity was pushed to the limit, skewing prices as well.

“Everybody is a little bit fed up because you’ve got two big Chinese players and they basically do whatever they believe the market is and everybody else has to follow,” said another trader with a western oil company who also declined to be named.

According to Trade Arabia, while Murban would give the benchmark a bigger liquidity boost due to its larger output, it is of better quality than existing Dubai basket grades. This means buyers would have to pay a premium to any transacted price.

For Al-Shaheen, Qatar Petroleum and partner Maersk Oil would have to reduce the grade’s cargo size to 500,000 barrels from 600,000 barrels. This would put time restriction on producers, requiring them to schedule three more cargoes each month.

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