RPT-CORRECTED-UPDATE 1-Shell's shock move jumpstarts oil benchmark reform debate

Sun Feb 10, 2013 8:15pm EST
 
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(Repeats story to some subscribers)

* Shell's rules start Monday for May and beyond cargoes

* Rules would improve liquidity in North Sea market -Shell

* Platts says will ignore Shell's terms for now

LONDON/NEW YORK, Feb 8 (Reuters) - Royal Dutch Shell has unilaterally amended the rules of one of the important components of the North Sea Brent market, which sets the basis of billions of dollars of oil trade worldwide in an effort to support trading liquidty. Shell said it would alter its SUKO 90 terms which govern how forward BFOE (Brent, Forties, Oseberg and Ekofisk) cargoes are traded.

In an amendment to terms and conditions posted on its website Shell said BFOE forward cargoes loading in May 2013 and thereafter will be governed by a new "quality premium" wording, in a move the oil major said was aimed at bolstering liquidity in the key North Sea market.

The SUKO 90 terms are the standard terms for the forward BFOE cargo market, a complex interlocking market for bilateral forward oil sales contracts in the North Sea that underpin Brent crude futures, the benchmark for global oil prices.

The Brent benchmark has come under scrutiny from oil market analysts as overly reliant on increasingly small streams of North Sea crude oil production, which critics say leaves the Brent price open to distortion and manipulation.

Shell said it will apply a new quality premium to BFOE forward month contracts - referring to deals in Brent, Forties Oseberg and Ekofisk crudes - the four crudes deliverable against a commitment to supply a forward BFOE cargo. Such cargoes, traded in months, turn physical under nomination procedures also spelt out in SUKO 90 terms whereby loading dates are assigned to individual cargoes, which are thereafter referred to as Dated Brent cargoes.   Continued...