12/12/2021 by Mark
The Dated Brent benchmark, which is the basis of futures contracts for Brent Crude, may have the US WTI Midland grade added to it, with Reuters reporting having seen a document showing that oil major BP would support the move.
According to Reuters, the document it saw has the energy giant saying:
“BP strongly believes that the inclusion of WTI Midland, executed correctly, is the best solution for enhancing liquidity, retaining Brent as a well-supplied and trusted light, sweet benchmark.”
The document also says that BP thinks Forties and Brent will need to be taken out of the benchmark in the medium term due to lower volumes, making their values increasingly harder to assess.
The Brent and Forties fields provided the foundation for North Sea oil production in the latter decades of the 20th century, but they are now coming to the end of their economically feasible lifetimes. The Forties field currently only produces about 20,000 barrels per day (bpd), while much of the infrastructure in the Brent field is being decommissioned, making oil from them increasingly rare.
BP, the maker of Castrol products like metalworking fluids, therefore seems to want to address liquidity issues by incorporating WTI Midland, which is a light, sweet grade of crude oil produced in the US interior that would be compatible with Brent’s reputation as a trustworthy light, sweet benchmark. An alternative solution would be to add oil from the large Johan Sverdrup field offshore of Norway, but some object to this because it has a sourer nature than WTI Midland.
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