Interview: Analyst sees possibility of far East Asia oil pricing system

A senior oil analyst has said there is a possibility of forming a Far East Asia oil pricing system in the future.

Jonty Rushforth, senior director of Oil and Shipping Price Group at S&P Global Platts, told Xinhua in a recent interview there may be a world shift toward CIF (Cost Insurance and Freight) pricing in the future.

Rushforth said Platts had long considered the possibility of CIF far East Asia price, and maybe one day it could be an important part of the global oil market.

So far, most benchmark prices have preferred to use FOB (Free On Board) pricing because of flexibility.

Asia accounts for more than one-third of the total trade reported to the Platts process, especially the recent increasing activities from Chinese companies, proving the need for a new marker for East Asia crude oil pricing.

"Chinese companies are a very significant part of Platts market on close process for crude," said Rushforth. "Any producer, if they get more crude, they talk to Chinese companies, because that's where the demand growth is."

China is now one of the largest buyers in the international crude market. But China didn't have a significant role in the commodity futures trading, like West Texas Intermediate (WTI) futures in New York and London's Brent futures, that can influence market prices. Rushforth said he didn't agree with that.

"I prefer pricing 'voice' rather than the word pricing 'power'. China is the largest net crude importer in the world, and China also probably has the loudest voice in the Dubai crude process. Because a lot of trade focus on Chinese companies and focus on going into China, all price has a lot of China voice in it," he said.

According to the U.S. Energy Information Administration, U.S. crude oil exports in 2016 climbed 12 percent above the 2015 level, and the new destinations including China.

Rushforth didn't think the trend would increase WTI price's influence. "We haven't yet seen the U.S. crude export becoming a substantial part of the market," he said.

"In fact, dated Brent remains far more widely used in the international crude market than any American crude price. WTI is very much a domestic U.S. price. It's not an international price really."

Besides, Rushforth said Platts didn't think either Brexit or a second Scotland independence referendum would have a major impact on dated Brent as a broad pricing benchmark to the world.

"Whatever crude oil in the North Sea belongs to the UK or Scotland, it will be available to the international market," he added. Endit