Brent traders are rerouting WTI crude cargoes from Europe

Major traders of US WTI Midland crude, now part of the dated Brent benchmark, have used a “bookout” option in the Platts window to divert cargoes to Europe elsewhere, in a move that could weigh on Brent prices dated. Reuters reported exclusively on Tuesday, citing trading sources and analysts.

The so-called reservation clause is allowed under the Platts methodology for commodities.

WTI Midland, produced in Texas, was included in the Datad Brent portion of the Brent benchmark last year as one of several grades underlying the contract. Dated Brent, the world’s leading benchmark price assessment, is rated by Platts. Apart from WTI Midland, Dated Brent includes Brent, Forties, Oseberg, Ekofisk and Troll – all of which are crude grades produced in the North Sea.

According to the Intercontinental Exchange, Brent is the price barometer for about 80% of global crude oil.

The rerouting of US cargo originally destined for Europe could affect the price of dated Brent, according to analysts who spoke to Reuters. Selling goods to Europe creates the perception that demand in Europe is stronger than it actually is, they added.

However, Reuters has not established any conclusive link between commodity trading activity and prices, it notes.

Platts told Reuters it had not received any complaints about cargo being diverted.

“Such contract changes are typical in many markets,” Joel Hanley of S&P Global Commodity Insights told Reuters.

Platts does not intend to retroactively change its ratings for dated Brent if the commodity is booked, Hanley added.

Some of the biggest independent oil traders – including Vitol Group, Trafigura and Gunvor – used records of US WTI commodities traded in Dated Brent, anonymous trading sources told Reuters.

Asked to comment on the rerouting of WTI cargoes to Europe, a Trafigura spokesman told Reuters:

“As outlined in the Platts methodology and common among industry participants, we seek to accommodate our buyers’ requests for additional offloading options should market forces dictate cargo rerouting.”

By Charles Kennedy for Oilprice.com

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