The North Sea crude oil trading market was transformed into a political battleground as Platts, the organisation that publishes official Brent prices, said it would expand the definition of Brent to include trade in Forties and Oseberg crude.
The move by Platts is in response to mounting concern that oil output from the Brent system had fallen to a level at which traders could easily manipulate the price.
The Platts decision to include Forties, a BP field, and Norway’s Oseberg field will add support to BP, which last week proposed to begin trading a new “BFO” forward contract, based on Brent, Forties and Oseberg crude.
Shell, which is the main shareholder in the Brent system, last week opposed the BP proposal, and the market was yesterday braced for a commercial war between Shell and BP as each company seeks support for their contracts.
The move by Platts will also present a dilemma to the International Petroleum Exchange, which uses the physical Brent price to settle its Brent futures contract at maturity. The exchange, which yesterday said that it was assessing the situation, has until July 10th to make a decision on whether to accept the Platts definition of Brent.
Jorge Montepeque, director of markets for Platts, said that the fifteen day forward market had been subject to price squeezing. He added: “The number of cargoes due to be lifted in July is only 18. When there are so few cargoes it is easy to manipulate.”
Shell would not comment on the Platts decision yesterday, but the Anglo Dutch company said in a letter to BP last week that it would continue to trade fifteen day Brent contracts on existing terms. For its part, BP said that it would decide in two weeks whether to begin trading its proposed BFO contracts.
The IPE could face embarrassment and damage to the highly lucrative Brent futures market if it fails to judge correctly the level of support for the proposed BFO contract.
The choice of the city of Helsinki is not incidental as the capital of Finland had hosted US-Soviet negotiations on the limitation of nuclear stockpiles in 1969