Adi Imsirovic

Senior Research Fellow

Adi Imsirovic has over 30 years of experience in oil trading. He held a number of senior positions, including Global Head of Oil at Gazprom Marketing & Trading, Director of Petraco and the Head of their Singapore office and The Regional Manager of Texaco Oil Trading for Asia.

He was a Fulbright Scholar and he studied at the Graduate School of Arts and Sciences, Harvard University. Adi also taught economics at Surrey University for several years: Energy Economics as well as Resource and Environmental Economics. He has a PhD in Economics and a Masters degree in Energy Economics.

He has written a number of papers and articles on the topic of oil and gas prices, benchmarks, and energy security. He is the author of the book: ‘Trading and Price Discovery for Crude Oils: Growth and Development of International Oil Markets’, published by Palgrave in August 2021.

Contact

Email: adi.imsirovic@oxfordenergy.org

Brent assessment will remain as if it was a ‘Free on Board’ (FOB) basis, despite the inclusion of the WTI Midland crude loaded on the US Gulf Coast (USGC).
The cargo size will change to from 600k to 700k barrels reflecting the usual size of oil loaded in the US and bound for Europe as well as the size of modern Aframax vessels.
The ‘Dated’ Brent bids, offers, and trades for this grade delivered into Rotterdam will be adjusted to freight in Northwest Europe (NWE) so that the prices of WTI Midland and rest of the ‘Brent basket’ crudes are comparable.
The US grade can also be nominated into the Brent forward contract. While the detailed mechanics of the workings of the cash market do not seem to have been fully agreed yet, it is likely to resemble Dated Brent in as much as the value of WTI Midland will have to reflect the realities of the North Sea cash market. In other words, any Midland crude delivered to a cash buyer in Rotterdam should have its price adjusted for freight, ‘as if it loaded in the North Sea’.

Several versions of bilateral contracts or general terms and conditions (GT&Cs) for the ‘new’ Brent benchmark have emerged. The purpose of this Energy Comment is to discuss these proposed terms and other outstanding issues that need to be settled before the contract starts trading next year. [post_title] => The Brent Benchmark – Where Do We Stand? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-brent-benchmark-where-do-we-stand [to_ping] => [pinged] => [post_modified] => 2022-07-27 12:16:33 [post_modified_gmt] => 2022-07-27 11:16:33 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=45117 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 44758 [post_author] => 111 [post_date] => 2022-04-04 17:03:22 [post_date_gmt] => 2022-04-04 16:03:22 [post_content] => Brent is the world’s most important crude oil benchmark. Arguably, it is responsible for pricing almost seventy percent of globally traded crude oil and long-term LNG. Over time however, the falling production of Brent has forced the price reporting agencies (PRAs) to introduce new grades in the ‘basket’ of crudes eligible for delivery as ‘Brent’ and widen the loading dates that can be used in their assessments. Currently, in any given month, only a couple of cargoes of the grade Brent are loaded and there have even been calls for the removal of the grade from the benchmark altogether. Brent has become just a brand name in a price assessment process that must be one of the most complex in the global commodity space. Even now, the five grades that make up the Brent basket namely Brent, Forties, Ekofisk, Oseberg and Troll (BFOET), are not sufficient to provide the necessary liquidity for the world’s most important oil benchmark. In February 2021, S&P Global Platts announced the decision to introduce West Texas Intermediate (WTI) Midland in the Brent benchmark, and the latest version of S&P Global Platts proposal has been presented to the industry for consultation until early April 2022. The proposal will make the already complicated benchmark and price discovery process even more so. The purpose of this Energy Comment is to outline the reasons for the proposed change and discuss the possible consequences for the market and the industry if the latest proposal is adopted. [post_title] => The Future of the Brent Oil Benchmark: A Radical Makeover [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-future-of-the-brent-oil-benchmark-a-radical-makeover [to_ping] => [pinged] => [post_modified] => 2022-04-04 17:03:22 [post_modified_gmt] => 2022-04-04 16:03:22 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44758 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 44586 [post_author] => 259 [post_date] => 2022-02-23 16:34:14 [post_date_gmt] => 2022-02-23 16:34:14 [post_content] => The specter of climate change has impacted shareholder sentiment making many market participants evaluate their business models in accordance with Cop-26 pledges – looking for ways of winning the mandate for capital in a sustainable way. The most familiar approach to reducing carbon footprint is by creating ‘GHG-verified’ claims. Typically, these involve a verified account of supply chain emissions, which are then offset through the retirement of carbon credits – themselves generated by projects that aim to reduce or remove carbon-equivalent emissions and are traded in voluntary carbon markets (VCMs). Trades have been reported for GHG-Verified or ‘carbon neutral’ (and carbon equivalent) LNG, crude oil, naphtha and condensate – with the largest share seen in the LNG market. The rationale for these trades to date seems to have been twofold – to capture a degree of environmental prestige and to test the market’s ability to deliver an operational framework. While the former of these faces the challenge of convincing investors and consumers, the latter faces the need to convince not just the market but ultimately policymakers and regulators. Already governments are looking at including carbon accounting not just in domestic frameworks but into trade legislation. Despite: ‘… methane emissions from oil imports as important as (and in many countries more important than) those from pipeline gas and LNG…’, the research in the GHG emissions for crude oil has been relatively sparse. This is partly due to the complexity given hundreds of different grades of oil, transportation and widely different refining processes. The aim of this paper is start a discussion regarding data, policy and commercial transactions in regards to the oil emissions and present some instruments which may provide tools to reduce such emissions or, at very least, promote transparency necessary for further progress. Our principal focus is a framework for internationally traded oil and we suggest a direction for further research. [post_title] => GHG-verified mechanisms for internationally traded crude oil and possible impact on oil benchmarks [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => ghg-verified-mechanisms-for-internationally-traded-crude-oil-and-possible-impact-on-oil-benchmarks [to_ping] => [pinged] => [post_modified] => 2022-02-23 16:34:14 [post_modified_gmt] => 2022-02-23 16:34:14 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=44586 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 43508 [post_author] => 111 [post_date] => 2021-03-08 10:56:52 [post_date_gmt] => 2021-03-08 10:56:52 [post_content] => On February 22, 2021, the price reporting agency S&P Global Platts (Platts) made an announcement that it would include WTI Midland in the Dated Brent and Cash BFOET assessments from July 2022 crude oil deliveries. While the inclusion of the US crude in the FOB Dated Brent assessment was expected, the announcement that Platts would change both their Dated and cash Brent assessments into CIF Rotterdam prices came as a shock to the market. This new proposal is nothing short of revolutionary. If implemented, the change would undermine the key ‘pillars’ of the current Brent market and replace them with something entirely new. It would also likely undermine and possibly destroy the forward Brent market. In the process, it would undermine all the existing Brent futures and derivatives contracts as well. The whole plethora of derivatives contracts such as CFDs, EFPs, DFLs, Brent swaps would probably change or disappear. For Platts, this change is a gamble. If implemented, the industry may reject it and look for an alternative pricing system. But the change could also put the Brent complex onto entirely new footing, potentially to last for a very long time. [post_title] => CIF Brent Benchmark? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => cif-brent-benchmark [to_ping] => [pinged] => [post_modified] => 2021-03-08 10:56:52 [post_modified_gmt] => 2021-03-08 10:56:52 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=43508 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 39831 [post_author] => 111 [post_date] => 2020-07-31 11:22:03 [post_date_gmt] => 2020-07-31 10:22:03 [post_content] => The global oil demand shock due to the COVID-19 pandemic has sent markets and benchmarks into turmoil. In the height of the demand shock, WTI traded at negative values while the divergence in Middle Eastern benchmarks was laid bare. Excess supply of oil naturally gravitated to China, the biggest oil importing country in the world, increasing ‘spot’ activity in delivered barrels into the country. This, in turn, led to a flurry of activity on the Shanghai International Energy Exchange (INE) oil futures contract, which traded at a hefty premium to ICE Brent and DME Oman. As it temporarily decoupled from other regional and global benchmarks, the INE contract made several significant steps forward: Liquidity increased markedly and in response, the INE added a substantial amount of storage capacity. This allowed for increased volumes of physical deliveries and has also encouraged more established foreign traders to deliver into the INE contract. Going forward, it remains to be seen whether these high volumes of deliveries into the contract will continue, or whether the events of the past few months are merely the result of the April anomaly. As the INE contract matures and the physical infrastructure continues to develop, much will also depend on domestic reforms and whether more private Chinese refiners and traders are able to trade the contract more actively, which in part will be contingent on a further liberalization of the domestic crude buying system. At the same time, the question of the INE’s position as a regional or even global benchmark will continue to attract attention. But this Comment argues that even though the INE is still far from being a benchmark, this should not be mistaken for China’s lack of pricing power in the global oil market. Arguably, China has become increasingly active in price setting for a decade now. The COVID-19 pandemic, and the surge in Chinese buying, have further highlighted China’s importance as a global price-setter, with or without its own established crude benchmark. [post_title] => The Shanghai Oil Futures Contract and the Oil Demand Shock [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => the-shanghai-oil-futures-contract-and-the-oil-demand-shock [to_ping] => [pinged] => [post_modified] => 2020-07-31 11:22:03 [post_modified_gmt] => 2020-07-31 10:22:03 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=39831 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [5] => WP_Post Object ( [ID] => 39167 [post_author] => 111 [post_date] => 2020-07-06 12:09:43 [post_date_gmt] => 2020-07-06 11:09:43 [post_content] => In October 2018, Saudi Aramco changed the pricing formula it uses to price its long-term crude oil sales to Asia. Rather than using the equally weighted average prices for Dubai and Oman as assessed by the Price Reporting Agency (PRA) S&P Global Platts (referred to in this article as Platts Dubai and Platts Oman), Saudi Aramco replaced Platts Oman in the formula with the marker price of the Oman Crude Futures Contract traded on the Dubai Mercantile Exchange (referred to as DME Oman). Until recently, the market barely felt the difference, as historically Platts Oman and DME Oman have been closely aligned and the price difference was very small (a few cents) on most days. However, the current crisis has exposed the vulnerabilities of existing benchmarks, leading to very different price outcomes, with the divergence between DME Oman and Platts Oman assessment reaching $6.56 per barrel on 22^nd April 2020. While this divergence could prove to be only a temporary phenomenon, caused by the massive oil demand shock due to the pandemic, it exposed the structural differences between the two benchmarks, methodologies, and the crudes they represent. Recent events have generated a healthy debate on the usefulness and limitations of existing benchmarks in the Gulf region, whether the PRAs need to adjust their underlying assessment methodologies, and whether the producers need to revisit their pricing formulas. This Energy Comment analyses some key aspects of this debate and explores the potential shifts in crude pricing systems. Given the tensions in the region’s existing medium sour benchmarks, the desire of a key regional player to introduce a new futures contract and a light sour benchmark, alongside the rise of China as the major importer of Gulf crude and its desire to shift pricing to its own futures contract, we expect the changes to the Gulf crude oil pricing system, which have already been occurring before the current crisis, to accelerate. [post_title] => Middle East Benchmarks and the Demand Shock [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => middle-east-benchmarks-and-the-demand-shock [to_ping] => [pinged] => [post_modified] => 2020-07-06 12:09:43 [post_modified_gmt] => 2020-07-06 11:09:43 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=39167 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [6] => WP_Post Object ( [ID] => 38712 [post_author] => 111 [post_date] => 2020-06-19 10:49:23 [post_date_gmt] => 2020-06-19 09:49:23 [post_content] => While most of the recent analysis has focused on the impact of supply and demand shocks on futures prices, the impact of these shocks on the shift in oil trade flows and on the dynamics of physical differentials has received much less attention. This is despite the fact that physical differentials provide valuable information about oil market conditions and about key shifts in its dynamics. In the complex web of differentials and shifts in trade flows Nigerian crudes play an important role as the swing barrels both to the east and the west of the Atlantic basin. Nigerian grades also have many features, particularly their tradability on a spot basis, which make them a bellwether of changes in market fundamentals. The predominance of spot trading is rewarding in tight market conditions as traders compete to bid up the quality differentials. But in the face of an adverse demand shock, Nigerian cargoes are the first to be distressed (i.e. the cargoes remained unsold) with unsold barrels ending up in over-ground storage both on-land and floating storage. In this Comment, we discuss some of the key characteristics of Nigerian crudes, then explain the market adjustment mechanisms in physical differentials, Dated Brent relative to futures, the spread between Dubai and Brent, and freight rates that allow the clearance of Nigerian barrels in an over-supplied market, and how understanding these mechanisms could prove useful in assessing the strength of the current recovery. [post_title] => Nigerian Barrels and the Demand Shock: Differentials and Changing Oil Trade Flows [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => nigerian-barrels-and-the-demand-shock-differentials-and-changing-oil-trade-flows [to_ping] => [pinged] => [post_modified] => 2020-06-19 13:15:16 [post_modified_gmt] => 2020-06-19 12:15:16 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=38712 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [7] => WP_Post Object ( [ID] => 38413 [post_author] => 111 [post_date] => 2020-06-08 13:09:59 [post_date_gmt] => 2020-06-08 12:09:59 [post_content] => While exposing some of the fragilities in the current international oil pricing system and oil benchmarks, the massive demand shock hitting the oil market also revealed the increasing sophistication and complexity of oil markets and the interconnectedness of the various layers surrounding the benchmarks. Perhaps this was best illustrated in the Brent complex, when at the apex of the crisis in April 2020, the layer connecting the forward/ futures Brent to the Dated Brent, i.e. the Contracts for Difference, did most of the stretching, sending signals to market players about the stresses in the physical markets and storage facilities while the futures market was reflecting expectations of a faster demand recovery and a large supply response from producers. For the various financial layers, including the Contracts for Difference, to perform their functions of risk management and price discovery efficiently, ensuring that these markets attract sufficient liquidity is of vital importance. Nigerian and WAF crudes play a key role in the Brent complex. One key feature in the marketing of these crudes is the pricing optionality, which adds to the attractiveness of term contracts, especially in volatile market conditions and when the market changes structure from backwardation to contango (or vice versa). The main objective of this Energy Comment is to explain why, and how, pricing options are used, their links to the CFDs and how, in the current environment of high volatility, pricing optionality can contribute to market liquidity as traders position themselves on the Forward Dated Brent curve to manage their risk. We use the pricing options offered by Nigerian National Petroleum Corporation (NNPC) as an example. [post_title] => Crude Oil Pricing Optionality and Contracts for Difference [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => crude-oil-pricing-optionality-and-contracts-for-difference [to_ping] => [pinged] => [post_modified] => 2020-06-08 13:09:59 [post_modified_gmt] => 2020-06-08 12:09:59 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=38413 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [8] => WP_Post Object ( [ID] => 37299 [post_author] => 111 [post_date] => 2020-04-28 10:45:48 [post_date_gmt] => 2020-04-28 09:45:48 [post_content] => This Comment analyses how the various oil benchmarks are coping with the unprecedented shock hitting the oil market. The collapse of the futures May WTI price and the negative pricing on April 20 epitomizes the extent of the stresses in the oil system but also exposes the vulnerabilities of some of the oil benchmarks to the current shock, the pricing assessment methods, and our understanding of what these benchmarks really represent. It also reveals a deeper fundamental issue related to the relationship between the futures and physical prices. While some of these vulnerabilities have short term fixes, others may take a long time to emerge. But regardless of its underlying causes, the extreme dislocation of the May WTI contract in its last two days of trading is an early warning of the extreme volatility and the sharp price movements that are still to come. [post_title] => Oil Benchmarks Under Stress [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-benchmarks-under-stress [to_ping] => [pinged] => [post_modified] => 2020-04-28 10:45:48 [post_modified_gmt] => 2020-04-28 09:45:48 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=37299 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [9] => WP_Post Object ( [ID] => 37150 [post_author] => 111 [post_date] => 2020-04-22 12:48:38 [post_date_gmt] => 2020-04-22 11:48:38 [post_content] => Oil and gas markets seem similar, but have become progressively different over the past several decades. Natural monopoly and cyclical booms and busts are common features of their histories. But oil has been a liberalised global market based on regional and global benchmark prices for several decades, while natural gas market liberalisation and a move to spot and hub-based prices is a more recent phenomenon in Europe, and remains at a relatively early stage in Asia. However, substantial increases in global LNG trade in the 2010s, accompanied by an increase in short term trading and spot pricing, have led to observations that a global gas market is developing. The collapse in oil and (to a less extent) gas demand following the coronavirus pandemic has coincided with, and contributed to, record low oil and gas prices. This extreme cyclical event is likely to accelerate the move to market pricing in Asian LNG, but it remains unclear whether its longer-term consequences will hold back or accelerate the transition away from oil and gas and towards a lower carbon economy. [post_title] => A Comparative History of Oil and Gas Markets and Prices: is 2020 just an extreme cyclical event or an acceleration of the energy transition? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => a-comparative-history-of-oil-and-gas-markets-and-prices-is-2020-just-an-extreme-cyclical-event-or-an-acceleration-of-the-energy-transition [to_ping] => [pinged] => [post_modified] => 2020-04-22 12:48:38 [post_modified_gmt] => 2020-04-22 11:48:38 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=37150 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [10] => WP_Post Object ( [ID] => 36735 [post_author] => 111 [post_date] => 2020-04-06 11:44:26 [post_date_gmt] => 2020-04-06 10:44:26 [post_content] =>

A combination of unprecedented demand and supply shocks are testing the oil market and its physical infrastructure to the limits. While the sharp fall in the futures price of benchmarks such as Brent and WTI over the last few weeks reflects the severity of the crisis, the recent movements in price levels and their volatility capture only part of the picture and do not fully reveal the extent of the large imbalances building in the system. To capture these imbalances, it is important to look at the evolution of some of the key differentials and spreads; as in the extreme market conditions that we are currently witnessing, it is the differentials which do most of the adjustment to reflect the underlying changes in the physical market and the shift in trade flows. Although price levels have exhibited extreme movement and high volatility in recent weeks, movements in price differentials and spreads have been even more acute, breaking most records set in previous cycles. In fact, one could argue that currently there is a disconnect between the futures prices and the physical differentials which is pointing towards a more distressed market.

Last week President Trump while advocating ‘free market’ principles in correcting the market imbalance, also called on Russia and Saudi Arabia to reach an agreement to restrict their supplies and in case they don’t, implicitly threatened to impose tariffs on crude imported from those countries. He also kept raising expectations by indicating that a deal is imminent and Russia and Saudi Arabia ‘will be cutting back approximately 10 Million Barrels, and maybe substantially more’ which was followed by another comment only a few minutes later that this ‘could be as high as 15 Million Barrels’. In response to President Trump’s tweets, futures Brent and WTI rallied, at a time when most of the physical prices and differentials are pointing in the opposite direction. In addition to the massive volatility that such tweets create, raising expectations will only increase the extent of dislocations and the disconnect between paper and physical markets, which means that differentials and spreads have to do even more stretching to send the correct signals to the physical players and operators and to allocate crude and products through the globe in the face of the most severe demand shock. These disconnections however are not sustainable and the alignment between physical and paper markets will eventually happen. Trump’s tweets risk making such an alignment abrupt and severe, introducing unnecessary volatility and extreme price movements, especially if the proposed producers’ meeting later this week fails to deliver an agreement on an output cut. The oil market is not broken; it is still functioning well, and this is despite some misguided interventions. [post_title] => Shocks and Differentials: How are the oil markets coping? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => shocks-and-differentials-how-are-the-oil-markets-coping [to_ping] => [pinged] => [post_modified] => 2020-04-07 11:11:49 [post_modified_gmt] => 2020-04-07 10:11:49 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=36735 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [11] => WP_Post Object ( [ID] => 31951 [post_author] => 111 [post_date] => 2019-10-14 13:28:54 [post_date_gmt] => 2019-10-14 12:28:54 [post_content] => In just over a week, the theoretical cost of taking a barrel of oil from the Gulf to Asia, in the cheapest possible way, rose by $6 per barrel. At a time when refinery margins are in single digits, this is a major blow to refinery profitability. The US administration’s decision to sanction two subsidiaries of China COSCO Shipping Energy, alongside announcements by global traders including Exxon and Unipec that they are banning the use of vessels linked to oil flows from Venezuela have effectively taken close to 300 of the global tanker fleet offline. In addition, longer sailing times from the US to Asia tie vessels in for longer, while ships are entering dockyards for retrofits ahead of the new maritime rules that come into effect on 1 January 2020. In short, a perfect storm seems to have hit the shipping industry. As a result, refiners and traders, will look to buy regional grades, ideally with dedicated vessels. Arbitrage movements will become unattractive. Unless committed, US exports from Houston will be postponed as much as physically possible. The impact on LNG markets is harder to read due to less liquid freight market. Depending on the number of affected vessels, the impact could be even greater as LNG is harder to store and a large proportion of vessels are still dedicated to particular projects. The market seems to believe that the situation will not remain tight for long, but barring a relaxation of sanctions—which will likely be harder than the market expects—oil and gas trading may be getting first glimpses of what de-globalisation looks like. [post_title] => Sanctions, Shipping, and Oil Markets [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => sanctions-shipping-and-oil-markets [to_ping] => [pinged] => [post_modified] => 2019-10-14 14:02:59 [post_modified_gmt] => 2019-10-14 13:02:59 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31951 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [12] => WP_Post Object ( [ID] => 31931 [post_author] => 111 [post_date] => 2019-10-02 10:38:16 [post_date_gmt] => 2019-10-02 09:38:16 [post_content] => The need for a new marker for East of Suez crude oil pricing has dominated debate in oil trading circles over the past several years. The latest opening salvo has been launched by Abu Dhabi National Oil Company (ADNOC), currently in the process of laying out a roadmap to launch a light crude reference marker of its own – both to price its own exports and to develop a regional benchmark in the Middle East, to reflect shifting Asian fundamentals and shifts in global crude oil flows. Underpinning this ambition is the role of Murban – a light high-sulphur crude oil (40° API gravity and 0.7% sulphur) produced onshore in Abu Dhabi. What is driving the move? How has Middle East crude pricing evolved and is Murban a viable candidate for regional benchmark status? This Comment seeks to answer these questions and to examine the challenges and next steps required for ADNOC to promote the grade to benchmark status. As this Comment argues, the Middle East is not a region that changes its pricing system quickly: the road to establishing Murban as a viable benchmark is still long and many challenges lie ahead. Nevertheless, the desire to establish a Murban benchmark clearly shows that the pricing regimes in the Gulf and in Asia cannot be immune to the structural shift in trade flows and the rising power of Asia. Furthermore, if the Gulf producers want to avoid pricing power shifting to Asian consumers, they have no choice but to continue to innovate and offer attractive solutions to their key customers. [post_title] => Murban: A benchmark for the Middle East? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => murban-a-benchmark-for-the-middle-east [to_ping] => [pinged] => [post_modified] => 2019-10-02 10:38:16 [post_modified_gmt] => 2019-10-02 09:38:16 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31931 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [13] => WP_Post Object ( [ID] => 31675 [post_author] => 111 [post_date] => 2019-06-18 10:56:57 [post_date_gmt] => 2019-06-18 09:56:57 [post_content] => The sharp increase in US shale production since 2011 has resulted in structural shifts in regional and global oil trade flows. In turn, this is having a major impact on oil benchmarks inside and outside the US. Brent, the major benchmark for international oil trade, is likely to be impacted the most. While the volume of US crude delivered to Europe has been rising since the US lifted the ban on crude exports in 2016, production of North Sea oil grades deliverable into the Brent basket has been falling for some time. The Brent complex must adapt to these transformations or risk its position being undermined, but changing an established benchmark with manifold layers is not a straightforward process and would require changes to the various layers in the Brent complex and their interrelationships. This comment examines a key layer of the Brent system: Contracts for Difference or CFDs. [post_title] => Contracts for Difference and the Evolution of the Brent Complex [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => contracts-for-difference-and-the-evolution-of-the-brent-complex [to_ping] => [pinged] => [post_modified] => 2019-06-18 10:56:57 [post_modified_gmt] => 2019-06-18 09:56:57 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31675 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [14] => WP_Post Object ( [ID] => 31485 [post_author] => 111 [post_date] => 2019-03-21 11:16:56 [post_date_gmt] => 2019-03-21 11:16:56 [post_content] => On 25 February this year Platts, a division of S&P Global, announced the inclusion of delivered, or CIF (Cost, Insurance and Freight), Rotterdam offers of North Sea oil cargoes into its flagship Dated Brent benchmark starting from 1 October 2019. Competing price reporting agency (PRA) Argus is already publishing its ‘New North Sea Dated’ assessment (this includes delivered assessments of non-North Sea grades) and is likely to officially adopt it as a methodology behind its ‘North Sea Dated’ index in July this year. These moves may represent the biggest changes to a major global oil benchmark this century. The changes are necessary for two main reasons: the fall in North Sea production and trade and the increase in Europe’s oil imports from the USA. This Comment will discuss the current state of the Dated Brent benchmark, the impact of declining volumes of oil included in the price assessment process, and the increasing flow of US oil exports to Europe.

[post_title] => Changes to the 'Dated Brent' benchmark: more to come [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => changes-dated-brent-benchmark-come [to_ping] => [pinged] => [post_modified] => 2019-03-21 11:16:56 [post_modified_gmt] => 2019-03-21 11:16:56 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31485 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [15] => WP_Post Object ( [ID] => 31257 [post_author] => 111 [post_date] => 2018-11-02 10:37:49 [post_date_gmt] => 2018-11-02 10:37:49 [post_content] => Since October 2018 Saudi Aramco has used the DME Oman daily settlement price in its pricing formula for Asian customers. The DME Oman futures contract settles daily, based on a weighted average of trades between 16.25 and 16.30 Singapore time (often referred to as a ‘window’). In line with the usual timing of Asian oil purchases, this contract trades two months before the actual month of loading. Therefore, during November 2018, for example, the front month contract is January 2019. The Oman official selling price (OSP) is set using the monthly average of the DME Oman daily settlements. Physical Oman is generally traded on the basis of this OSP. On most days the DME Oman settlement is based on a relatively large volume of trades. However, this volume tends to fall rapidly as the last day of trading approaches. In March 2016 DME introduced a new methodology designed to boost liquidity on the last day of the contract (‘on expiry’). Nevertheless, as the price spike at the end of September 2018 shows, the problem persists. While this was an extreme event, it still needs to be addressed. The most likely solution, as presented here, is the introduction of an alternative delivery mechanism.

[post_title] => What Next for Asian Benchmarks? – A Footnote [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => next-asian-benchmarks-footnote [to_ping] => [pinged] => [post_modified] => 2018-11-02 10:37:49 [post_modified_gmt] => 2018-11-02 10:37:49 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31257 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [16] => WP_Post Object ( [ID] => 31195 [post_author] => 111 [post_date] => 2018-09-20 09:54:13 [post_date_gmt] => 2018-09-20 08:54:13 [post_content] => In October 2017, the International Maritime Organization (IMO) decided to limit sulphur content in all marine fuels from the current 3.5 per cent to 0.5 per cent, commencing in January 2020. Meeting these requirements will involve huge effort by the refining and shipping industries. Investments in the energy industry are notoriously large, risky, price sensitive and come with long lead times and gestation periods. Given these features, and as the implementation deadline approaches, most of the adjustments will need to be reflected in terms of movement in relative product prices. So far, most of the literature has focused on the IMO 2020 impacts on the refining and shipping sectors. Relatively little has been done to assess the impact on the prices of global oil benchmarks. This Comment attempts to fill this gap. Specifically, it analyses the impact of IMO 2020 on the Brent– Dubai (BD) spread, the key price differential which regulates oil flows between the two biggest oil markets: the Atlantic basin and Asia. It begins by discussing the relationship between the Brent and Dubai benchmarks, and factors that drive this relationship. We then construct a simple crude yield comparison between the Brent and Dubai baskets using existing forward curves for products and freight. We find that the forward prices for oil products and shipping costs are consistent with the forward swap spread for BD. However, under certain circumstances, high sulphur fuel oil (HSFO) may have to find a home in the power sector. If HSFO is forced to compete with coal, the BD spread may have to widen to almost $10 per barrel. Nevertheless, the BD spread will eventually adjust back to historical levels (and relatively quickly), driven by storage economics, investments in shipping and upgrading refinery units. [post_title] => IMO 2020 and the Brent-Dubai Spread [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => imo-2020-brent-dubai-spread [to_ping] => [pinged] => [post_modified] => 2018-09-20 09:54:13 [post_modified_gmt] => 2018-09-20 08:54:13 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/?post_type=publications&p=31195 [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) [17] => WP_Post Object ( [ID] => 27392 [post_author] => 1 [post_date] => 2014-10-15 11:54:17 [post_date_gmt] => 2014-10-15 10:54:17 [post_content] => Dubai crude oil has been the main Asian benchmark since the mid-1980s. The most notable and recent development in the Dubai benchmark has been the significant increase in the liquidity in the Platts ‘window’. What has caused this increase in liquidity? To answer this question, this comment will look at the two recent shifts in international oil market dynamics. Firstly, Asian demand growth and the increase in US tight oil production, and secondly, the associated shift in crude oil trade dynamics. Then it will examine the changes within the Asian crude oil market, leading to the increased assertiveness of the regional players in the price formation process. Finally, this comment will consider some remaining issues with the Dubai market, and a possible way forward for Asian benchmarks in general. [post_title] => Oil Markets in Transition and the Dubai Crude Oil Benchmark [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => oil-markets-in-transition-and-the-dubai-crude-oil-benchmark [to_ping] => [pinged] => [post_modified] => 2016-02-29 16:00:19 [post_modified_gmt] => 2016-02-29 16:00:19 [post_content_filtered] => [post_parent] => 0 [guid] => https://www.oxfordenergy.org/wpcms/publications/oil-markets-in-transition-and-the-dubai-crude-oil-benchmark/ [menu_order] => 0 [post_type] => publications [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 18 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 45117 [post_author] => 111 [post_date] => 2022-07-27 12:16:33 [post_date_gmt] => 2022-07-27 11:16:33 [post_content] => The introduction of the WTI Midland crude oil into the ‘Brent’ benchmark has caused a fair amount of controversy, debate, and argument, but the industry seems to be gradually reaching a consensus regarding the broad format of the new benchmark:

Brent assessment will remain as if it was a ‘Free on Board’ (FOB) basis, despite the inclusion of the WTI Midland crude loaded on the US Gulf Coast (USGC).
The cargo size will change to from 600k to 700k barrels reflecting the usual size of oil loaded in the US and bound for Europe as well as the size of modern Aframax vessels.
The ‘Dated’ Brent bids, offers, and trades for this grade delivered into Rotterdam will be adjusted to freight in Northwest Europe (NWE) so that the prices of WTI Midland and rest of the ‘Brent basket’ crudes are comparable.
The US grade can also be nominated into the Brent forward contract. While the detailed mechanics of the workings of the cash market do not seem to have been fully agreed yet, it is likely to resemble Dated Brent in as much as the value of WTI Midland will have to reflect the realities of the North Sea cash market. In other words, any Midland crude delivered to a cash buyer in Rotterdam should have its price adjusted for freight, ‘as if it loaded in the North Sea’.

Latest Publications by Adi Imsirovic

27.07.22

The Brent Benchmark – Where Do We Stand?

The introduction of the WTI Midland crude oil into the ‘Brent’ benchmark has caused a fair amount of controversy, debate, and argument, but the industry seems to be gradually reaching a consensus regarding the broad format of the new benchmark: Brent assessment will remain as if it was a ‘Free on Board’ (FOB) basis, despite […]

By: Adi Imsirovic Kurt Chapman

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04.04.22

The Future of the Brent Oil Benchmark: A Radical Makeover

Brent is the world’s most important crude oil benchmark. Arguably, it is responsible for pricing almost seventy percent of globally traded crude oil and long-term LNG. Over time however, the falling production of Brent has forced the price reporting agencies (PRAs) to introduce new grades in the ‘basket’ of crudes eligible for delivery as ‘Brent’ […]

By: Adi Imsirovic Kurt Chapman

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23.02.22

GHG-verified mechanisms for internationally traded crude oil and possible impact on oil benchmarks

The specter of climate change has impacted shareholder sentiment making many market participants evaluate their business models in accordance with Cop-26 pledges – looking for ways of winning the mandate for capital in a sustainable way. The most familiar approach to reducing carbon footprint is by creating ‘GHG-verified’ claims. Typically, these involve a verified account […]

By: Adi Imsirovic Jonty Rushforth

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08.03.21

CIF Brent Benchmark?

On February 22, 2021, the price reporting agency S&P Global Platts (Platts) made an announcement that it would include WTI Midland in the Dated Brent and Cash BFOET assessments from July 2022 crude oil deliveries. While the inclusion of the US crude in the FOB Dated Brent assessment was expected, the announcement that Platts would […]

By: Adi Imsirovic

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31.07.20

The Shanghai Oil Futures Contract and the Oil Demand Shock

The global oil demand shock due to the COVID-19 pandemic has sent markets and benchmarks into turmoil. In the height of the demand shock, WTI traded at negative values while the divergence in Middle Eastern benchmarks was laid bare. Excess supply of oil naturally gravitated to China, the biggest oil importing country in the world, […]

By: Michal Meidan Adi Imsirovic

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06.07.20

Middle East Benchmarks and the Demand Shock

In October 2018, Saudi Aramco changed the pricing formula it uses to price its long-term crude oil sales to Asia. Rather than using the equally weighted average prices for Dubai and Oman as assessed by the Price Reporting Agency (PRA) S&P Global Platts (referred to in this article as Platts Dubai and Platts Oman), Saudi […]

By: Bassam Fattouh Adi Imsirovic

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19.06.20

Nigerian Barrels and the Demand Shock: Differentials and Changing Oil Trade Flows

While most of the recent analysis has focused on the impact of supply and demand shocks on futures prices, the impact of these shocks on the shift in oil trade flows and on the dynamics of physical differentials has received much less attention. This is despite the fact that physical differentials provide valuable information about […]

By: Bassam Fattouh Adi Imsirovic

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08.06.20

Crude Oil Pricing Optionality and Contracts for Difference

While exposing some of the fragilities in the current international oil pricing system and oil benchmarks, the massive demand shock hitting the oil market also revealed the increasing sophistication and complexity of oil markets and the interconnectedness of the various layers surrounding the benchmarks. Perhaps this was best illustrated in the Brent complex, when at […]

By: Bassam Fattouh Adi Imsirovic

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28.04.20

Oil Benchmarks Under Stress

This Comment analyses how the various oil benchmarks are coping with the unprecedented shock hitting the oil market. The collapse of the futures May WTI price and the negative pricing on April 20 epitomizes the extent of the stresses in the oil system but also exposes the vulnerabilities of some of the oil benchmarks to […]

By: Bassam Fattouh Adi Imsirovic

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22.04.20

A Comparative History of Oil and Gas Markets and Prices: is 2020 just an extreme cyclical event or an acceleration of the energy transition?

Oil and gas markets seem similar, but have become progressively different over the past several decades. Natural monopoly and cyclical booms and busts are common features of their histories. But oil has been a liberalised global market based on regional and global benchmark prices for several decades, while natural gas market liberalisation and a move […]

By: Jonathan Stern Adi Imsirovic

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06.04.20

Shocks and Differentials: How are the oil markets coping?

A combination of unprecedented demand and supply shocks are testing the oil market and its physical infrastructure to the limits. While the sharp fall in the futures price of benchmarks such as Brent and WTI over the last few weeks reflects the severity of the crisis, the recent movements in price levels and their volatility […]

By: Bassam Fattouh Adi Imsirovic

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14.10.19

Sanctions, Shipping, and Oil Markets

In just over a week, the theoretical cost of taking a barrel of oil from the Gulf to Asia, in the cheapest possible way, rose by $6 per barrel. At a time when refinery margins are in single digits, this is a major blow to refinery profitability. The US administration’s decision to sanction two subsidiaries […]

By: Adi Imsirovic Michal Meidan

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02.10.19

Murban: A benchmark for the Middle East?

The need for a new marker for East of Suez crude oil pricing has dominated debate in oil trading circles over the past several years. The latest opening salvo has been launched by Abu Dhabi National Oil Company (ADNOC), currently in the process of laying out a roadmap to launch a light crude reference marker […]

By: Ahmed Mehdi Eesha Muneeb Adi Imsirovic Bassam Fattouh

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18.06.19

Contracts for Difference and the Evolution of the Brent Complex

The sharp increase in US shale production since 2011 has resulted in structural shifts in regional and global oil trade flows. In turn, this is having a major impact on oil benchmarks inside and outside the US. Brent, the major benchmark for international oil trade, is likely to be impacted the most. While the volume […]

By: Bassam Fattouh Adi Imsirovic

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21.03.19

Changes to the ‘Dated Brent’ benchmark: more to come

On 25 February this year Platts, a division of S&P Global, announced the inclusion of delivered, or CIF (Cost, Insurance and Freight), Rotterdam offers of North Sea oil cargoes into its flagship Dated Brent benchmark starting from 1 October 2019. Competing price reporting agency (PRA) Argus is already publishing its ‘New North Sea Dated’ assessment […]

By: Adi Imsirovic

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02.11.18

What Next for Asian Benchmarks? – A Footnote

Since October 2018 Saudi Aramco has used the DME Oman daily settlement price in its pricing formula for Asian customers. The DME Oman futures contract settles daily, based on a weighted average of trades between 16.25 and 16.30 Singapore time (often referred to as a ‘window’). In line with the usual timing of Asian oil […]

By: Adi Imsirovic

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20.09.18

IMO 2020 and the Brent-Dubai Spread

In October 2017, the International Maritime Organization (IMO) decided to limit sulphur content in all marine fuels from the current 3.5 per cent to 0.5 per cent, commencing in January 2020. Meeting these requirements will involve huge effort by the refining and shipping industries. Investments in the energy industry are notoriously large, risky, price sensitive […]

By: Adi Imsirovic Ben Pryor

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15.10.14

Oil Markets in Transition and the Dubai Crude Oil Benchmark

Dubai crude oil has been the main Asian benchmark since the mid-1980s. The most notable and recent development in the Dubai benchmark has been the significant increase in the liquidity in the Platts ‘window’. What has caused this increase in liquidity? To answer this question, this comment will look at the two recent shifts in […]

By: Adi Imsirovic

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Latest Publications by Adi Imsirovic

The Brent Benchmark – Where Do We Stand?

The Future of the Brent Oil Benchmark: A Radical Makeover

GHG-verified mechanisms for internationally traded crude oil and possible impact on oil benchmarks

CIF Brent Benchmark?

The Shanghai Oil Futures Contract and the Oil Demand Shock

Middle East Benchmarks and the Demand Shock

Nigerian Barrels and the Demand Shock: Differentials and Changing Oil Trade Flows

Crude Oil Pricing Optionality and Contracts for Difference

Oil Benchmarks Under Stress

A Comparative History of Oil and Gas Markets and Prices: is 2020 just an extreme cyclical event or an acceleration of the energy transition?

Shocks and Differentials: How are the oil markets coping?

Sanctions, Shipping, and Oil Markets

Murban: A benchmark for the Middle East?

Contracts for Difference and the Evolution of the Brent Complex

Changes to the ‘Dated Brent’ benchmark: more to come

What Next for Asian Benchmarks? – A Footnote

IMO 2020 and the Brent-Dubai Spread

Oil Markets in Transition and the Dubai Crude Oil Benchmark

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