Shell Calls for Wider Crude Slate for Brent Benchmark

Shell on Wednesday urged oil pricing agency S&P Global Platts to protect the dated Brent crude benchmark from declining North Sea supply by including other grades, such as Russian Urals, in its price-setting process.

The benchmark, based on light North Sea crude grades, is used to price about two-thirds of the world’s oil but a decline in North Sea output has led to concerns that physical volumes could become too thin and prone to large price swings, Reuters reported.

Platts announced that it would add a fifth grade, Troll, to the benchmark slate from January 2018 but Shell says more must be added in the next two to three years and considers Russian medium sour Urals as a top candidate.

"A good benchmark need not only to be representative of what the region produces...If you had to pick one grade of crude, Urals is the one which North West European refineries should be designed to run optimally," Mike Muller, the vice president of crude trading and supply at Shell, told the Platts Crude Summit in London.

Muller also suggested that the price of dated Brent be derived from the average price of a basket of crudes, rather than by using the lowest priced of the four BFOE crudes on any given day.

This would simplify the price-setting process, he said.

Muller also called for a committee of independent experts to be formed to consult with Platts and the wider industry on future changes to the benchmark in order to ensure the views of all market players are represented.