IMO 2020 and the Forties de-escalator in Dated Brent

The International Maritime Organization’s decision to cap the sulfur level of global marine fuels on January 1, 2020 has been the dominant story in the oil markets for the last two years. Among the many questions raised by the imminent 0.5% cap on sulfur in marine fuels, some crude oil market participants are now asking what the implications could be for the Forties de-escalator, the key sulfur value adjustment mechanism that lies at the heart of the North Sea’s Brent crude complex. To understand what role the Forties sulfur de-escalator will play in a post-2020 world, it’s important to be clear about why it exists in the first place. The sulfur de-escalator was introduced in July 2007 to bring more stability for pricing for the North Sea’s Forties crude following the start-up of the heavy, sulfurous Buzzard field that year, as a new input into the blend. Essentially, it has successfully stabilized pricing for a grade with an unpredictable chemical composition, because the quality of Forties can vary substantially depending on the percentage of Buzzard crude in the blend at any given time. The vastly different nature of the Buzzard field can drastically change the quality of the crude sold… continue reading

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Source: CTRM Center

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