How do you measure the value of the world’s most important commodity?
It’s a conundrum that brought uproar in the oil market over the past few weeks after S&P Global Platts, the company that publishes the world’s key crude price, announced on Feb. 22 that it was going to radically change the very nature of that benchmark, known as Dated Brent.
Just nine days after announcing its ambitious overhaul, which had been meant to begin in June 2022, Platts was forced to apologize to the market for the suddenness of the move. A week later it went a step further: the changes would be shelved for an as-yet-undefined period.
“It is not surprising that it caused such an uproar in the market,” Adi Imsirovic, senior research fellow at the Oxford Institute for Energy Studies and an experienced oil trader, said in a paper on the reform. The proposal was “nothing short of revolutionary.”
While Platts may have hit pause on the plan, what the saga really highlighted was a more fundamental problem facing the global oil market. Volumes of Brent oil -- which gets its name from a Scottish oil field whose production peaked in the 1980s -- have slowed to a trickle. Platts widened what constituted ‘Brent’ to include four other grades -- Forties, Oseberg, Ekofisk and Troll -- but even those are slowly running out.
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