By Florence Tan
SINGAPORE (Reuters) - Oil pricing agency Platts is expected to announce by the end of this year which of two Middle East crude grades it will add to its Dubai benchmark in 2016 to boost the liquidity of its price assessment process, sources with knowledge of the matter said.
Platts has already made two changes since late October in an ongoing review of its assessment of the Dubai benchmark, which, along with Oman, is used to price more than 12 million barrels per day of Middle Eastern and Russian crude exported to Asia.
The agency said it will provide on Wednesday updates on the possible inclusion of Qatar's Al-Shaheen and Abu Dhabi's Murban to the Dubai and Oman benchmarks, and the possible implementation of a quality premium for deliveries of Murban.
Industry players have been calling on Platts to review its Dubai assessment, saying record trading by Chinese state companies in August during the Market-on-Close (MoC) process pushed liquidity to the limit and skewed prices.
"Obviously, (adding crude) makes the benchmark more liquid which is the main issue currently. So it's a step in the right direction," said a trader with a Western oil company who participates in the MoC process but declined to be named.
Some refiners are concerned that just adding volumes would not deter top energy consumer China from taking all the available supplies during the MoC, leaving few options for other key customers for Murban and al-Shaheen.
"Everybody is a little bit fed up because you've got two big Chinese players and they basically do whatever they believe the market is and everybody else has to follow," said another trader with a western oil company who declined to be named due to company policy.
Amrita Sen, chief oil analyst at Energy Aspects said: "We don't think this resolves the issues concerning the dominance of the Chinese buyers ... Because the problem wasn't about low underlying production. It was the lack of market participants."
OPERATIONAL AND PRICING ISSUES
To add either Murban or al-Shaheen to the Dubai basket, Platts would have to resolve both operational and pricing issues, traders said.
Murban would give the benchmark a bigger liquidity boost due to its larger output, but it is of better quality than existing Dubai basket grades, so buyers would have to pay a premium to any transacted price, traders said.
Platts has proposed using a premium that is 60 percent of the difference between its Murban and Oman price assessments in the previous month, said traders who had attended a Platts workshop in late October.
For al-Shaheen, Qatar Petroleum and partner Maersk Oil would have to change the grade's cargo size to 500,000 barrels from 600,000 barrels, requiring the producers to schedule three more cargoes each month.
The main issue with al-Shaheen, though, is that cargo loading dates are typically not known until after the 10th of each month, meaning buyers could end up with purchases that do not fit their shipping schedules, traders said.
Ship-to-ship transfers and cargo swaps have been discussed as ways to get around this, said one of the two sources.
Platts, part of McGraw Hill Financial Inc (N:MHFI), competes with Thomson Reuters in providing information to energy markets.