US benchmark crude WTI will play a major role in the Brent basket when it is included into Europe's benchmark later this year, but how much volume will make the transatlantic journey remains uncertain.
"WTI is undoubtedly going to dominate Brent," said Adi Imsirovic, Oxford Institute for Energy Studies' senior research fellow in a panel discussion today at the Argus Americas Crude Summit in Houston, Texas.
"If I was a producer of WTI Midland similar grades, I think I'd be very excited about it because it opens up more opportunities," said Imsirovic. "Not just for marketing and trading but also on the risk management side" because of added optionality.
Many traders will not pay attention to the WTI-into-Brent plan until it is imminent, according to CME Group's managing director and global head of energy and environmental products Peter Keavey. But that is now starting to come into focus.
The change for Argus' Dated Brent assessment is set to start for June-delivery cargoes, which would start trading in May.
Nonetheless, it is still new territory for many market participants.
"Most traders don't like uncertainty," said Keavey, "So they need to know exactly the mechanism in order to be willing to put risk on."
Some European market participants continue to familiarize themselves with what WTI crude is, and the light sweet grade was not the only one being considered for inclusion in the Brent basket by the market.
"There was an argument that Johan Sverdrup should go into the Brent basket directly," Argus' vice-president of business development James Gooder said. "But that was pushed back by certain people in the market who said it is too heavy."
The lingering concerns around WTI quality have steadily waned, but how much volume will be delivered into Europe is an unknown.
"Nobody knows," how much WTI will go to Europe, said Imsirovic. But "if the big players want to make the market work, it will work."
