The Brent crude benchmark for oil prices could soon include West Texas Intermediate, Bloomberg has reported, citing plans by S&P Global Platts to expand the most traded oil contract globally.
The ratings agency has invited feedback on the proposal by February 5.
According to the report, Brent is used as the basis for pricing more than 65 percent of physical oil deliveries, and adding WTI to the basket that makes up Brent will highlight the growing importance of U.S. crude oil after the Obama administration removed a veto on U.S. oil exports five years ago.
“Since the restart of U.S. crude exports in 2015, WTI Midland has become a baseload grade for European refiners and a core part of the North Sea oil market,” according to Vera Blei, who is in charge of oil market price reporting at the ratings agency. She added that the inclusion of WTI to the Brent basket “would provide additional volume and ensure the continued robustness of Dated Brent for the next decade and beyond.”
The United States exported some 7.87 million bpd of crude oil and petroleum products in the four weeks to November 27, according to the Energy Information Administration’s latest weekly petroleum status report. This compared with 8.3 million bpd a year ago and 8.84 million bpd two years ago.
According to the Bloomberg report, citing S&P Platts data, European refiners have been importing West Texas Intermediate at the rate of over 400,000 bpd since the start of this year.
This is not the first time S&P Global Platts has floated the idea of adding WTI to the Brent basket. It did so last year as well but ultimately decided not to go through with the move, instead adding crude oil cargos arriving at the Dutch port of Rotterdam to the Brent basket, Bloomberg recalls.
By Charles Kennedy for Oilprice.com
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Dr Mamdouh G Salameh
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Visiting Professor of Energy Economics at ESCP Europe Business School, London