Increased exports of oil from the United States into Europe and Asia mean U.S. crude has snatched back its primacy in setting international pricing after North Sea grades have for decades determined the value of the world's most traded commodity. The trend has calmed volatility and limits the potential for trading plays, known by traders as squeezes, that have on occasions distorted the established Brent oil benchmark, based on North Sea crudes, traders and industry insiders said. Historically, U.S. West Texas Intermediate crude futures were the first widely accessible crude contracts launched on financial markets in 1983 until the Brent futures contract, launched in 1988, eventually gained prominence.
FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub in CushingLONDON - Increased exports of oil from the United States into Europe and Asia mean U.S. crude has snatched back its primacy in setting international pricing after North Sea grades have for decades determined the value of the world's most traded commodity.
Its rise has been checked by declining volumes from ageing North Sea fields, while U.S. production has continued to rise as a result of the shale revolution that meant oil previously too difficult to extract could be released. Adi Imsirovic, director at consultant Surrey Clean Energy and a veteran oil trader who has written extensively on Brent, said the amalgamation of the two international benchmarks was positive."Brent is working just fine," he said. "You've got the two major benchmarks in the world working in synch.
The price of dated Brent is set by the cheapest of the six crudes. An S&P Global chart provided to Reuters shows Midland having a leading role in setting the value. Asked to comment on whether the potential for trading plays had decreased, Platts said one aim of adding more oil to any benchmark was to prevent "anomalous" price rises.
"The power shifted and this is clearly seen when American companies who were not trading the North Sea in size suddenly rushed in."
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