US crude STS transfer from larger to smaller tankers is going to impact the pricing of the world’s most significant oil benchmark.
Its a hurdle removed
This development removes a hurdle traders had anticipated in and has been in the works for some time. Under the new rules, WTI Midland crude can be loaded onto a smaller Aframax tanker after being transferred from a larger vessel at sea. And can now be included in the pricing window managed by Platts. Which is also known as S&P Global Commodity Insights.
New guideline
“A seller may deliver from an Aframax that has performed a ship-to-ship (STS) transfer from another vessel, provided all of the oil on board that vessel has demonstrably loaded at one of the US Gulf Coast terminals approved by Platts,” the company said.
Dated Brent, the benchmark for 2/3 of global crude trades, will go through their biggest change ever. WTI Midland will join 5 North Sea grades setting the global benchmark in early May. This increases liquidity in the benchmark, which has been facing reduced supplies for several years.
Platts will evaluate bids, offers, or trades for benchmark prices only from cargoes on Aframax tankers. Which typically carries around 700,000 barrels of crude and will soon become the standard cargo size in the region. However, Bloomberg data indicates that almost 60% of US crude flows to Europe are via larger vessels. Like Very Large Crude Carriers, which can carry approximately 2 million barrels.
The guidelines state that a seller can use a supertanker to transport WTI Midland to Europe. And transfer the cargo to three Aframax tankers, with any qualifying cargoes offered on the Platts window.
Challenges still persist
Despite the new guidelines, challenges still persist. Traders have expressed worries about the higher expenses involved in STS transfers. Additionally, Platts will not yet evaluate cargoes directly from VLCCs or Suezmaxes. Most Suezmaxes that operate on this route only carry standard-sized cargo. Which is 700,000 barrels, despite having a capacity of 1 million barrels.