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, according to Reuters.
The decision is apparently to boost the liquidity of its price assessment process, sources ‘with knowledge of the matter’ said.
Platts has already made two changes since late October in an ongoing review of its assessment of the Dubai benchmark, which, along with Oman, is used to price more than 12mn barrels per day of Middle Eastern and Russian crude exported to Asia.
The agency is still evaluating market feedback following a comment period that ended on October 30, a Platts spokeswoman said in an e-mailed response.
Industry players have been calling on Platts to review its Dubai assessment, saying record trading by Chinese state companies in August during the Market-on-Close (MoC) process pushed liquidity to the limit and skewed prices.
“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 participates in the MoC process.
Platts has said in a subscriber note that the two grades under consideration are Abu Dhabi’s flagship Murban crude and Qatar’s Al-Shaheen grade.
Some refiners are concerned that just adding volumes would not deter top energy consumer China from taking all the available supplies during the MoC, leaving few options for other key customers for Murban and Al-Shaheen.
“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 declined to be named.
“We don’t think this resolves the issues concerning the dominance of the Chinese buyers because the problem wasn’t about low underlying production. It was the lack of market participants,” Amrita Sen, chief oil analyst at Energy Aspects, said.
