Trafigura, Gunvor ask spark jumps in Brent oil benchmark

By Alex Lawler

LONDON (Reuters) – Trading houses Trafigura and Gunvor bought nine crude commodities underpinning international benchmark Brent and bid for more, helping to deliver the steepest gains since changing how it was valued in 2023 .

Movements in the Brent physical market, a small club where oil majors and trading firms buy and sell crude commodities, have wider significance for producers and consumers, as Brent is the benchmark used to price much of the world’s oil .

Gains or losses in the physical market also influence international oil futures trading, where Brent crude futures rose 6.7 percent in June, the biggest monthly gain since September 2023, to $87 a barrel.

Initially based only on Brent, additional grades were progressively added to the benchmark as production from the North Sea fields declined. Most recently, US WTI Midland was added in 2023, bringing the total benchmarks to six.

Five classes – North Sea Brent, Troll, Ekofisk, Forties and Oseberg – have been raised since June 20, with Gunvor bidding for the first two and Trafigura the last three, according to trade sources. WTI stabilized after initial gains.

Trafigura has bought seven commodities since June 21 – four WTI commodities that day and two more this week, plus a forty commodity on Thursday. Gunvor bought Forties and WTI commodities on Monday.

Gunvor declined to comment on its trading strategy and Trafigura said it does not comment on commercial matters.

“These actions had a direct impact on the market, leading to the observed increase in prices,” oil analyst Philip Verleger said in a June 24 note, referencing his view on demand for the two firms’ commodities.

Dated Brent, as measured by LSEG, rose more than 10% in the two weeks from June 7 to June 21. This is the biggest two-week gain since March-April 2023.

The broader Brent complex includes dated Brent and physical commodities, swaps and the Brent Intercontinental Exchange (ICE) futures contract. Brent is used to price more than three-quarters of the oil traded globally.

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Oil market players had criticized benchmark Brent for having very little underlying supply of the five grades of North Sea crude, which increased its volatility.

To bolster it, oil index publisher Platts, part of S&P Global Commodity Insights, added WTI Midland to its assessment of Brent for June 2023 delivery.

Jorge Montepeque, who developed the benchmark Brent dated at Platts, said the latest trading activity coincided with reduced supply of North Sea grades due to summer oil field maintenance.

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Montepeque left Platts in 2015 and works for Onyx Capital Group as managing director of benchmarks.

Since the 2023 benchmark change, WTI has typically accounted for a larger weight than North Sea crude volume.

That’s still the case, although the amount of WTI Midland heading to Europe fell in June to about 850,000 bpd, the lowest since 2022, according to Kpler data.

Platts said the change to the Brent date is working and market feedback has been positive since the addition of WTI: “This is reflected in new participants, more liquidity and even more transparency.”

Adi Imsirovic, director at consultancy Surrey Clean Energy and an oil trader who has written extensively about Brent, said volatility would have been much higher had Midland not been added to the benchmark.

The spread between Midland and dated Brent, which averaged up $2.43 for delivery on June 21 when Trafigura bought four commodities, narrowed to up $2.30 by Thursday as a new sale interest. Forty grew during the same period.

“None of these benchmarks are perfect, but Brent looks good,” he said.

Thomson Reuters competes with Platts in providing oil market news and data.

(Reporting by Alex Lawler, additional reporting by Robert Harvey, editing by Dmitry Zhdannikov and Barbara Lewis)