Wednesday, February 20, 2019

Platts Launches Middle East Fuel Assessments

Posted by September 20, 2016

Oil price agency Platts will launch new assessments for fuels including gasoline and diesel in the Middle East that could lead to the region becoming a major price hub as exports from new Gulf refineries surge.

Platts, a unit of S&P Global Inc, will begin publishing independent prices for Middle East gasoline, middle distillates including diesel and jet fuel, and fuel oil from Oct. 3, the company said in a note to subscribers on Tuesday.

The company will also assess derivative prices for these oil products to calculate the physical values, potentially pitting the Middle East region against established pricing centres like Singapore and London, should liquidity take off.

"I think the liquidity is still very low now so it will be a challenge for them to get interest, but that could potentially change if a market is established like here in Singapore since (Middle East) already has storage," a Singapore-based middle distillates trader said.

New refining capacity in the Gulf has driven record high exports of diesel and jet fuel from the region, which has changed trade flows in Asia and Europe.

Oil companies in Asia and the Middle East use Platts crude and products price assessments in a wide number of contracts. The assessments are mainly calculated from derivative contracts and physical cargoes traded during the company's market on close (MOC) process which is referred to by the industry as the "window."

Platts currently calculates the majority of its Middle East prices by offsetting shipping costs between the Middle East and Asia from its Singapore price assessments, a value known as a netback.

This is due to an illiquid derivatives market in the Middle East, though volumes have been picking up since May this year when the Dubai Mercantile Exchange (DME) launched contracts and the Intercontinental Exchange (ICE) more recently, brokers and traders said.

In its note on Tuesday, Platts said it will assess derivative values based on its MOC process, on derivatives exchanges or heard in over the counter markets.

The new prices will be labelled as free-on-board (FOB) at the port of Fujairah in the United Arab Emirates and run alongside the existing Middle East netback prices, Platts said.

The prices will reflect FOB trades at "any safe and sound port" within the Gulf region, adjusted back to Fujairah.

"As the Middle East continues its diversification into producing and exporting refined oil products, market participants have identified a need for independent oil products price assessments," said Dave Ernsberger, Global Head of Oil Content, S&P Global Platts in a statement.

By Jessica Jaganathan

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