Brent risks losing relevance amid declining production from North Sea oil fields. Photo: nerijus adomaitis/Reuters
The operator of the Brent crude benchmark is considering pricing the widely used gauge off a broader range of oil grades, including U.S. and Nigerian oils, moving away from a focus on the North Sea where output has been declining.
Brent rose $2.40 a barrel, or 3%, on Monday to $81.20 for its highest close in nearly four years.
S&P Global Platts, which sets the benchmark by collating prices from oil fields in the North Sea, launched a consultation on Monday that could eventually see the use of oil from U.S. grade West Texas Intermediate Midland and other international streams.
Brent risks losing relevance amid declining production from those North Sea oil fields. Falling output of the oil grades used to set Brent, and the small number of companies that produce it, has also raised concerns among traders and industry participants that the market is vulnerable to manipulation.
Around two-thirds of the world’s oil is priced off Brent—prices that influence costs for electricity generated by oil and the fuel in people’s cars. The people who put these benchmarks together are clamoring for a role for other oil benchmarks, including in China and Dubai, while the U.S. oil gauge, West Texas Intermediate, is gaining more currency abroad as American crude is exported.
S&P Global Platts said its consultation will consider the inclusion of streams of crude such as Norway’s Gullfaks and Nigerian Qua Iboe oil shipped to Rotterdam.
In January, S&P Global Platts added prices from Norway’s Troll field to the basket of oil that Brent is priced off.
Analysts also expect the prices of oil from Norway’s Johan Sverdrup field will be included in Brent once it begins production in 2019.
Write to Sarah McFarlane at [email protected]