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UK-based supermajor BP favors the addition of WTI Midland, a light sweet crude grade from the United States, to the Dated Brent benchmark, the underlying benchmark of the Brent Crude futures contract, Reuters reported on Monday, quoting a document it has seen.
The grades Brent, Forties, Oseberg, Ekofisk, and Troll from the North Sea currently comprise the Dated Brent benchmark. There have been discussions in recent years of adding another crude grade, considering the fact that with diminishing production from those large oilfields offshore the UK and Norway, liquidity for the benchmark also drops.
“BP strongly believes that the inclusion of WTI Midland, executed correctly, is the best solution for enhancing liquidity, retaining Brent as a well-supplied and trusted light, sweet benchmark,” the energy giant says, according to the document seen by Reuters.
Intercontinental Exchange (ICE), where the Brent futures are being traded, as well as pricing agency S&P Global Platts, have discussed how the Dated Brent benchmark could be made more liquid.
The other candidate for inclusion in Dated Brent has been Johan Sverdrup, the crude produced at the giant oilfield of the same name in the North Sea offshore Norway, which started commercial production in October 2019.
While Johan Sverdrup is indeed a grade pumped out of the North Sea, it is a more sour variety than WTI Midland.
According to Reuters, BP doesn’t support Johan Sverdrup for addition to Dated Brent benchmark precisely because of its more sour nature.
Earlier this year, the world’s largest independent oil trader, Vitol, also expressed support in favor of WTI Midland over Johan Sverdrup to be added to the Brent benchmark.
Vitol sees WTI as an adequate substitute for many of the current crudes in the Brent benchmark, CEO Russell Hardy said in September at the Platts APPEC 2021 conference, as carried by Reuters.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com