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Royal Dutch Shell is calling upon S&P Global Platts to consider including Russia’s Urals crude grade in the price assessment of the Dated Brent benchmark, to protect it from huge price swings amid falling North Sea supplies.
“A good benchmark need not only be representative of what the region produces ... If you had to pick one grade of crude, Urals is the one which northwest European refineries should be designed to run optimally,” Mike Muller, Vice President Global Crude Oil Trading & Supply at Shell, said at the Platts Crude Summit in London on Wednesday, as quoted by Reuters.
The benchmark currently comprises Brent, Forties, Oseberg, and Ekofisk, known as BFOE.
Shell, one of the world’s top crude oil traders, is now making a U-turn from two years ago when it had said that adding the Urals grade in the Brent benchmark would not be “worth the trouble”.
At today’s event, Muller’s suggestion pointed to Shell’s intent to see reforms in the benchmark.
“These are the sort of things Shell wishes to see in benchmarks going forward,” Bloomberg quoted Muller as saying.
In February this year, S&P Global Platts said that starting from January 2018, it would include Norway’s Troll crude grade in the Brent basket—a first such addition since 2007—in a bid to ensure that there will be sufficient deliverable North Sea crude reflected in the price assessments.
When production from the namesake Brent field declined, Platts added Forties and Oseberg in 2002 and Ekofisk in 2007 to the price assessment.
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Although production in the North Sea has stabilized now, the four grades in the BFOE basket are likely to decline further, and therefore, Platts “believes it is time to add another grade to the basket to ensure there is sufficient deliverable crude reflected in the price assessments,” it said back then.
Now Shell believes more grades must be added in pricing the Brent in the next two to three years, and Russia’s medium sour Urals would be a top contender.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.