Platts to start pricing Basra Light crude

Singapore:- Platts could start a price assessment for Iraqi Basra Light crude from October if the producer manages to standardise the quality of the oil it exports by December, a senior company official said on Wednesday.

Platts, a unit of McGraw Hill, provides the dated Brent benchmark that is used to price about two-thirds of global crude and also assesses Dubai and Oman, which are benchmarks for Gulf crude exports.

Iraq overtook Iran as Opec’s second-largest producer in June and the assessment could pave the way for Basra Light to become a deliverable crude for the Platts Dubai benchmark that prices about 12 million barrels per day of Gulf crude exported to Asia.

Including Basra Light may improve liquidity for the Dubai crude as output of the benchmark grade declines, making the marker more reflective of fundamentals. It will also increase trading in Basrah Light as participants seek to take positions in a grade that could become part of the benchmark.

But the difference in the quality of Basra Light exported from different terminals is a key issue that needs to be resolved before the assessment can start.

“Technically there are two strands, one that is 32-33 degrees in API and one that is 30,” Jorge Montepeque, Platts’ global director of market reporting, told Reuters.

The API (American Petroleum Institute) gravity is an arbitrary measurement of the relative density of petroleum liquids. Oil is usually more expensive if it is light, or has a high API gravity.

Iraq’s State Oil Marketing Organisation (SOMO) has indicated that it will comingle the grades and have one common grade by December, Montepeque said.

“If they do it, it will make a lot of sense for us to assess it in October as a single stream, if not then we’ll choose one,” he said, adding talks with SOMO were under way to determine if there would be any change in the schedule.

Iraq could become one of the top four oil producers in the world as its production is expected to triple to about 6 million barrels per day by 2016. Close to half of Iraq’s current exports of Basrah Light head to Asia.

An industry source told Reuters earlier that Platts and Iraq’s SOMO were holding discussions to add Basra Light as a deliverable crude for the Dubai benchmark.

Platts is still working on introducing Qatar Marine as a deliverable crude for Dubai, in addition to Oman and Abu Dhabi’s Upper Zakum, Montepeque said, declining to say when this will take place.

Reviewing Minas

The company is also reviewing its assessment of Indonesia’s Minas as regional markers in the Asia-Pacific are phased out in favour of dated Brent.

“Minas is starting to look like an outlier while everything else is dated Brent,” Montepeque said. “We will need to review to see whether it keeps as an outlier or we bring it in into the general fabric.”

The company will study different measures such as deliveries of alternative grades for Minas and increasing the cargo size to 200,000 barrels from 25,000 barrels, Montepeque said.

It could also measure the crude’s worth in terms of the oil products it yields or as a direct-burning grade based on liquefied natural gas and fuel oil prices, he added.

Vietnam could price all its crude on dated Brent instead of Minas by early 2013, joining oil producers Malaysia, Australia and Papua New Guinea in dropping volatile regional price markers.