(Bloomberg) -- S&P Global Platts apologized to oil traders for the speed at which it announced an overhaul of a price that underpins a swath of the world's crude oil transactions.
The company said the plans, which among other things involve adding U.S. crude to the key Dated Brent benchmark, took many in the market by surprise and incurred anger. Platts said it had to take the steps to ensure there's enough oil to make up the benchmark going forward as supply from the North Sea region declines.
“The suddenness of the announced changes and the lack of a further consultation have caused anger and frustration for some and we are sorry for that,” Vera Blei, head of oil markets price reporting at Platts said on a call with market participants and the media on Wednesday. “You told us that we have some work to do to rebuild relationships and trust, and that work is very much under way.”
Platts first announced a consultation on the changes in December, before confirming them last week. The plan took some traders by surprise as it will involve cargoes being priced at the point of delivery -- requiring the addition of shipping costs and making other fundamental changes to what the benchmark is. The modifications matter because the Dated Brent benchmark helps price more than two-thirds of the world's crude.
Among those who had originally voiced concern about the Platts plan was Intercontinental Exchange Inc., which houses multiple contracts tied to Dated Brent.
Before the revamp was announced, ICE sent Platts a letter cautioning against a speedy overhaul, according to a person familiar with the matter. The move sparked frenzied trading of some contracts last week, before both Platts and ICE issued statements clarifying their plans.
ICE also said in the letter it was surprised that Platts had chosen to add U.S. crude to the benchmark, without consulting on the addition of oil from Norway's giant Johan Sverdrup field. That crude is heavier and more sulfurous than those currently included in Dated Brent, making its addition trickier, Platts said.
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