Ship-to-ship transfers of US crude are impacting global oil benchmark prices Ship’s crew

By Sherry Su and Sharon Cho (Bloomberg) —

US crude being transhipped from larger to smaller tankers will help price the world’s top oil benchmark and remove what traders saw as a stumbling block in a long-planned reform.

WTI Midland crude, which was loaded onto a smaller Aframax tanker that received the cargo from a larger vessel on a sea transfer, is permitted to be offered in the S&P Global Commodity Insights price window, commonly known as Platts.

“A seller may supply from an Aframax that has operated a ship-to-ship transfer from another ship, provided all oil on board that ship can be shown to have been loaded at one of the Platts-approved U.S. Gulf Coast terminals.” , the company said in one Subscriber notice published on its website.

Dated Brent, the benchmark used to set two-thirds of global crude oil trade, is set to experience the most significant change in its history in the coming days. From the beginning of May, WTI Midland will be included in the current basket of five North Sea qualities – Brent, Forties, Oseberg, Ekofisk and Troll – which set standards worldwide.

The change brings much-needed liquidity to the benchmark, which has suffered from shrinking supply for years. Friday’s note clarified one of the uncertainties surrounding the overhaul.

In determining benchmark prices, Platts will only evaluate bids, offers or deals for cargo aboard Aframax tankers, which typically carry about 700,000 barrels of crude oil – soon to be the standard cargo size in the region. But nearly 60% of US crude oil flows to Europe were shipped larger tankerssuch as Very Large Crude Carriers, which can hold about 2 million barrels, according to data from Bloomberg.

The guidance clarifies that a WTI Midland seller can still charter a supertanker to ship its oil to Europe, which can then, in principle, transfer the cargo from ship to ship onto three Aframaxes. Any of the loads may be offered on Platt’s window as long as it meets the quality criteria.

“Platts is aware that larger ships are moving Midland to Europe and beyond and wants to reflect the observed flows,” Platts said in an emailed response to questions from Bloomberg. “We have been discussing this with the industry for some time and believe this inclusion of cargoes that may already be STS-ed gives such flows an opportunity to be reflected in Dated Brent.”

However, problems remain. Some merchants have expressed concerns about the increased costs associated with STS transfers. And Platts won’t be rating loads directly from VLCCs or Suezmaxes, at least for now. This is despite the fact that most Suezmaxes plying this route only carry standard-size cargoes of 700,000 barrels, although they can hold at least 1 million barrels.

© 2023 Bloomberg LP

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