Malaysia Petronas wants to ditch Brent benchmark - sources

Reuters

* Petronas moots idea of platform to trade basket of crudes

* New Asia crude price marker aim at reflecting fundamentalsin region

By Florence Tan and Jessica Jaganathan

SINGAPORE, Sept 10 (Reuters) - Malaysia's state energy firmPetronas is considering setting up a new mechanism to price oilproduced in the Asia-Pacific that could better reflect demandand supply in the region, sources familiar with the matter saidon Tuesday.

The plan comes two years after the second largest oilproducer in Southeast Asia dropped a volatile Asian price markerfor dated Brent pricing, a move that also prompted Vietnam andBrunei to change their benchmark.

Plans remained sketchy although the one source said that theprice could be determined through trades of a variety of Asiancrude on a trading platform.

"They are looking to set up a crude basket, one that can betraded using a platform," the source said.

Petronas has mooted the idea of a new price marker to otherproducers in the Asia Pacific as well as refiners and traders,the sources said on the sidelines of a major oil gathering inSingapore.

"It's more to reflect regional supply and demand moreaccurately," one of the sources said. "Dated Brent sometimes canbe detached from regional market."

Dated Brent is underpinned by a dwindling pool of four NorthSea crudes - Brent, Forties, Oseberg and Ekofisk (BFOE) andoften spikes whenever the main crude stream Forties suffer anoutage. The marker weakens whenever demand falls in Europe suchas during refinery maintenance seasons.

"They want to move away from dated Brent pricing as theyfeel it doesn't accurately reflect the quality of their crudes,"a source with an Asian oil firm involved in discussions withPetronas said. Brent has a higher sulphur content than mostMalaysian grades.

Petronas' renewed interest in a new crude marker could alsostem from a potential rise in its output as its new oil terminalin Sabah starts operation later this year, a third source said.

A source from one of the regional oil producers said theywere still waiting for more details from Petronas on the pricingmechanism.

The Indonesia Crude Price (ICP) remains the only regionalmarker after Petronas dropped the Asia Petroleum Price Index(APPI) in 2011, two years after Australian producers moved todated Brent.

Asian crude markers suffer from low liquidity due toproduction decline at mature fields, with prices frequentlydiverging from global benchmarks.

The move to the Brent benchmark at the time was to boosttransparency by putting Asian crude on a common platform withgrowing imports of rival Brent-linked sweet grades from theAtlantic Basin, Central Asia and Latin America.

But Brent is still viewed as a European benchmark for oilproduced several thousand miles away from Asia.

Buyers and producers remained cautious as it may be too soonto move to a new benchmark.

"It'll be an uphill climb because so many other people alsowant to do their own benchmarks," the first source said.

In China, the Shanghai Futures Exchange has announced plansto launch crude oil futures while Russia also nursed theambition of making its ESPO crude the Asia benchmark. (Reporting by Jessica Jaganathan and Florence Tan, editing byWilliam Hardy)

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