OIES: CIF Brent Benchmark? - March 2021 - eng (pdf)

On February 22, 2021, the price reporting agency S&P Global Platts (Platts) made an announcement that it would include WTI Midland in the Dated Brent and Cash BFOET assessments from July 2022 crude oil deliveries. While the inclusion of the US crude in the FOB Dated Brent assessment was expected, the announcement that Platts would change both their Dated and cash Brent assessments into CIF Rotterdam prices came as a shock to the market. This new proposal is nothing short of revolutionary. If implemented, the change would undermine the key ‘pillars’ of the current Brent market and replace them with something entirely new. It would also likely undermine and possibly destroy the forward Brent market. In the process, it would undermine all the existing Brent futures and derivatives contracts as well. The whole plethora of derivatives contracts such as CFDs, EFPs, DFLs, Brent swaps would probably change or disappear. For Platts, this change is a gamble. If implemented, the industry may reject it and look for an alternative pricing system. But the change could also put the Brent complex onto entirely new footing, potentially to last for a very long time.

By: Adi Imsirovic