LONDON (Reuters) – The addition of U.S. WTI Midland crude into the global dated Brent oil benchmark has gone smoothly, the head of research at the Intercontinental Exchange (ICE), home of the Brent crude futures contract, said on Tuesday.
Oil-index publisher S&P Global Commodity Insights, widely known as Platts, added the U.S. crude grade to the benchmark from June deliveries. The U.S. crude joins five North Sea crudes that help set the dated Brent price.
“It’s been a smooth transition, a successful transition, and to a large degree pretty much as expected,” Mike Wittner of ICE said, speaking at the Argus European Crude Conference in London on Tuesday.
Dated Brent is a part of the wider Brent complex that includes physical cargoes, swaps, and the ICE Brent futures contract. Brent is used to price over three-quarters of the world’s traded oil.
The price of dated Brent is set by the cheapest of the six crudes.
Wittner said that over the six months from May to October, WTI Midland had been the most competitively priced grade, therefore setting the benchmark, around 55% of the time, which was broadly in line with expectations prior to the grade’s addition to the benchmark pricing mechanism.
WTI has added 1-1.5 million barrels per day (bpd) of oil supply into the pool of grades that make up the North Sea benchmark, helping bolster liquidity as the supply of the North Sea crude is in decline.
Other speakers at the conference gave positive comments on the addition of WTI.
“Liquidity has been good, in fact, it’s been excellent,” Kurt Chapman, director at Zenith Energy and a veteran crude trader who has written papers on Brent, said.
Adi Imsirovic, director at Surrey Clean Energy and another veteran trader and author on Brent, also said the changes were working well.
“Europe is a major importer of WTI – it’s not a coincidence and it’s not surprising that WTI is dominant in Brent, but the market is working fine,” he said.
A senior official at CME Group, home of the WTI crude futures contract, said international participation in trading some instruments was growing.
As many as 72% of new entities trading the Argus WTI Houston differential to the NYMEX WTI futures contract are non-U.S. based, Amanda Townsely, senior director at CME Group said.
Open interest on that contract has risen 120% since the start of 2023 as hedging of U.S. Gulf coast cargo loadings increases, she added.
Reporting by Robert Harvey, Ahmad Ghaddar and Natalie Grover; Editing by Alex Lawler and Mark Potter. Original Story HERE