Ian Taylor, the head of the world’s largest oil trading company Vitol, called on the Brent benchmark to be updated, The Financial Times says.
At an International Petroleum Week Conference in London, the oil boss stated that using Brent as a major classification of sweet light crude oil in the world becomes less effective as the crude oil reserves in the North Sea are dwindling.
"As an industry we have a major problem here that we have to solve," Taylor noted. To date, Brent crude oil benchmark is used as the market indicator by refineries and hedge funds. Besides, it is considered as a guide for the futures, options and other markets.
The benchmark contains Brent, Forties, Osederg, and Ekofisk crudes, and the blends’ output has slid sharply for the past few years. So, the Brent benchmark raised doubts as to whether it is adequate, especially bearing in mind the possible price fluctuation in case the output falls further.
In January, the shipments of the four blends dropped to 930,000 barrels a day compared to 1.1 million barrels three years ago, Energy Aspects reports.
Ian Taylor proposed broadening the Brent benchmark to include grades from West Africa, Algeria, Kazakhstan, Russia, and even the United States. Many experts are of the same opinion on this matter.
"We need to add similar grades from outside the region over the next two to five years if the new Norwegian production is not significant," Jorge Montepeque, Platts editorial director for market reporting told. Norway is planning to invest $8 billion to Johan Sverdrup, one of the largest fields of the country, to buck the current downtrend in oil production that has been recording for the last decade. Anyway, the works will kick off no earlier than in 2019.
So, all that makes us a hint that the oil producers will look at large crude streams from Asia, North Africa, West Africa, and the Baltics.
