Bloomberg News

Nymex Exchange ‘Concerned’ About Timeframe for Brent Changes

September 29, 2011

(Adds Nymex Brent open interest data in third paragraph.)

Sept. 29 (Bloomberg) -- CME Group Inc.’s Nymex unit is “concerned” about the planned dates for changes to North Sea Brent crude pricing, according to a company official.

Platts, the energy news and pricing arm of McGraw Hill Cos., announced Sept. 16 that it will lengthen the loading period for its Dated Brent assessment, which is used to price more than half the world’s oil, to 10 to 25 days forward from 10 to 21 days starting Jan. 6. The move may increase the number of cargoes delivered against Dated Brent and boost trading activity. Brent, Forties, Oseberg and Ekofisk blends, known collectively as BFOE, are used to price the benchmark.

Open interest on Brent-related options on the Nymex exchange stands at 430,000 contracts, or roughly 50 percent of the market share, Daniel Brusstar, director of energy research and product development at CME Group, said at the Argus European Crude Trading conference in Geneva today. Open interest for Brent swaps on Nymex are at about 188,000 positions, he said.

“We have to oversee an orderly market, so we’re concerned about the months ahead,” he said. “The shift to a 25-day Brent market is probably overdue, but bringing it into the market with three months’ notice is a bit disruptive.”

‘New Expiry’

The bourse’s competitor ICE Futures Europe said yesterday it may start “new expiry” Brent crude futures and options contracts in the fourth quarter to take into account changes in the loading dates for the North Sea oil. The first settlement month for the contracts will be February 2013, according to ICE’s website.

Nymex is monitoring the impact of the Platts changes and hasn’t proposed any changes to its Brent-related contracts, Brusstar said.

“For any changes in a futures or an options contract we look for at least 12 to 18 months’ notice,” Brusstar said. “We have a lot of customers who are very concerned about their options positions.”

The move by Platts may cause “short-term difficulty” in the futures and derivatives markets for swaps and options, Royal Dutch Shell Plc said in an e-mailed statement Sept. 16.

Shell, Europe’s largest oil producer, said in a letter posted on its website Aug. 10 that it recommended Platts implement the change in 2013 instead of 2012 “to ensure an orderly transition in the marketplace.”

--With assistance from Sherry Su and Grant Smith in London. Editors: Alessandro Vitelli, Bruce Stanley.

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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