The world’s most important petrol price is about to change for good, and it will have an impact on global markets.
After years of wrangling, the world’s most important oil price is about to be transformed for good, allowing crude supplies from west Texas to help determine the price of millions of barrels a day of petroleum transactions.
Oil producing states will often sell their barrels at small premiums or discounts to Dated, so the precise mechanics of how it is formed matter to them. In addition, the benchmark lies at the center of a complex web of derivatives, ultimately shaping Brent oil futures that get traded on exchanges. So WTI Midland might then influence the price a seller of an Atlantic Basin barrel charges a refinery in China.Imagine the existing Dated grades, which go under the acronym BFOET, are at $80 a barrel.
The expiry of the May Brent futures contract at end-March will rely on some trades of a June Brent exchange of futures for physical contract, which will take the changes into account. “Without a forward market, there’s no way to financially settle the ICE Brent contract,” said Kurt Chapman, a veteran oil trader and ex-head of crude at Mercuria Energy Group, who retired in 2018 after almost three decades on the front lines of global oil trading.Assuming traders take to the adjustments, it will be transformative in terms of the underlying volume of oil that can be transacted.
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