By Alex Lawler
LONDON (Reuters) – Trading houses Trafigura and Gunvor last week bought nine cargoes of crude oil that underpin the international Brent benchmark and bid for more, helping to fuel the biggest gain since a change in the way it was rated in 2023.
The moves in the physical Brent market, a small club in which oil giants and trading firms buy and sell crude cargo, have broader significance for producers and consumers as Brent is the benchmark used to measure much of the oil in the world. to praise the world.
Gains or losses in the physical market also impact international oil futures trading, where futures rose 6.7% in June, the biggest monthly gain since September 2023, to $87 a barrel.
Originally based solely on Brent, additional grades have gradually been added to the benchmark as production from the North Sea fields declined. Most recently, the US WTI Midland was added in 2023, bringing the total of benchmark figures to six.
Five grades – North Sea Brent, Troll, Ekofisk, Forties and Oseberg – have risen since June 20, with Gunvor bidding on the first two and Trafigura on the last three, according to information from trading sources. WTI has remained stable after initial gains.
Trafigura has purchased seven cargoes since June 21: four WTI cargoes on that day and two more this week, plus a Forties cargo on Thursday. Gunvor bought cargoes from the Forties and WTI on Monday.
Gunvor declined to comment on its trading strategy and Trafigura said it does not comment on commercial matters.
“These actions have had a direct impact on the market, leading to the observed price increase,” oil analyst Philip Verleger said in a June 24 note, referring to his view of the two companies’ demand for freight.
Dated Brent, as assessed by LSEG, rose by more than 10% in the two weeks from June 7 to June 21. That’s the biggest two-week gain since March-April 2023.
The broader Brent complex includes dated Brent and physical loads, swaps and the Intercontinental Exchange (NYSE:) Brent futures contract. Brent is used to price more than three-quarters of the world’s traded oil.
SUPPORTED BENCHMARK
Oil market players had criticized the Brent benchmark for very limited underlying supply of the five North Sea crude grades, increasing its volatility.
To reinforce this, oil index publisher Platts, part of S&P Global Commodity Insights, has added WTI Midland to its Brent price assessment from June 2023 deliveries.
Jorge Montepeque, who developed the legacy Brent benchmark at Platts, said the latest trading activity coincided with a lean supply of North Sea grades due to oilfield maintenance over the summer.
Montepeque left Platts in 2015 and works for Onyx Capital Group as a managing director for benchmarks.
Since the 2023 benchmark change, WTI generally represents a larger share than the volume of North Sea crude oil.
That is still the case, although the amount of WTI Midland going to Europe fell to around 850,000 barrels per day in June, the lowest since 2022, according to Kpler data.
Platts said the move to dated Brent worked and that market feedback has been positive since the addition of WTI: “That is reflected in new participants, more liquidity and even greater transparency.”
Adi Imsirovic, director at consultant Surrey Clean Energy and an oil trader who has written extensively about Brent, said volatility would have been much higher if Midland had not been added to the benchmark.
The difference between Midland and Brent, which averaged plus $2.43 on a delivered basis on June 21 when Trafigura bought four loads, had fallen to plus $2.30 on Thursday as new sales interest emerged. The 1940s rose during the same period.
“None of these benchmarks are perfect, but Brent looks good,” he said.
Thomson Reuters (NYSE:) competes with Platts in providing oil market news and data.
