LONDON (Reuters) by Dmitry Zhdannikov – Oil major BP has clashed with rival Vitol in the once-languid West African crude market, buying up cargoes and taking a big derivative position that may have raised costs for European refiners. The West African crude market typically sees cargoes of Nigerian and Angolan change hands in back-to-back deals outside the Platts window, a system widely used by the industry to price crude. Pricing agency S&P Global Platts sets key oil benchmarks for the market. New trading opportunities arose from August, when broker Sunrise started the first derivative for Nigeria’s four largest crude oil grades – Bonny Light, Forcados, Qua Iboe and Bonga – mirroring derivatives trading in the North Sea. The derivatives, known as contracts for differences (CFDs), allow traders to bet on whether premiums of the four Nigerian grades versus the Brent benchmark will rise or fall. The CFDs, also known as swaps, can be used to hedge against price fluctuations during the voyage of a physical cargo to a consumer, which can take weeks. But CFDs can also be used to take a speculative position. According to five traders familiar with the developments, who asked not to be named because they… continue reading
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