Hess Energy Trading Co., or Hetco, sold North Sea Forties crude at the lowest discount in two months after it amassed more than a third of the shipments scheduled to load in February.
Hetco accumulated 10 Forties cargoes out of the planned 25 for February loading over a 11-day period this month, according to six people with knowledge of the trades who asked not to be named because the information is confidential. The company has since sold three cargoes and prices have retreated, a survey of traders and brokers monitoring the daily trading window run by McGraw-Hill Cos.’ Platts pricing agency shows. Forties is used to set Dated Brent, the benchmark for two-thirds of world oil.
The Forties discount to Dated Brent dropped to 40 cents, according to data compiled by Bloomberg. That’s the lowest since Nov. 18. The premium, or backwardation, on prompt cargoes of the crude jumped to 95 cents, the highest in at least four years on Jan. 14 as Hetco began to keep the shipments. The spread tumbled to minus 12 cents today, data from London-based brokers PVM Oil Associates Ltd. show. A London-based Hetco official declined to comment.
“It’s a good time to sell,” Andrey Kryuchenkov, London- based vice president of commodities research at VTB Capital, said today in an e-mail. “Spot demand tightness in the North Sea is easing following an early-winter price spike due to supply disruptions and colder-than-normal weather.”
Hetco sold two shipments to Royal Dutch Shell Plc. One cargo was for Feb. 4 to Feb. 6 loading at a discount of 40 cents to the Dated Brent benchmark, and the other for Feb. 5 to Feb. 7 at 35 cents below Dated, the survey showed. That compares with three shipments sold yesterday at discounts of 40 and 45 cents to Dated.
“Spot premiums eased, and with the discount to the front month future also widening, it’s only logical to book profits,” Kryuchenkov said. Brent crude for February on London’s ICE Futures Europe exchange expired in “stark backwardation” on Jan. 14, he said.
Hetco sold a third shipment for Feb. 9 to Feb. 11 to Statoil ASA at a discount of 40 cents to Dated Brent. This compares with a premium of 20 cents it asked for on Jan. 21. The company also sought to sell three more Forties cargoes and a consignment of Brent crude without success. The Platts window, which takes place daily from 4 p.m. to 4:30 p.m. London time, serves as a forum for North Sea trades.
The Forties shipments that were held by Hetco had amounted to 5.8 million barrels, compared with a total of 14.8 million barrels of the grade scheduled to load next month, based on a monthly loading schedules seen by Bloomberg. Cargoes are released into the market 21 days before loading and are linked to a so-called chain of forward contracts.
By holding most of the Forties cargoes, companies can influence prices in line with their trading strategy. Shell, Europe’s largest oil company, Vitol Group, the world’s biggest independent oil trader, and Trafigura Beheer BV have amassed larger-than-average supplies of Forties in the past year, according to the people.
Brent crude futures advanced about 3 percent this year, while its U.S. counterpart West Texas Intermediate declined about 4 percent.
“Brent is supported by unexpected maintenance and exceptional buying from a large trader,” Christophe Barret, London-based global oil analyst at Credit Agricole SA, said in a research note yesterday.
An oil-trading company can bet on the size of the spread between monthly Brent and related products. These can be contracts on the ICE Futures Europe exchange, or derivatives linked to Brent bought and sold directly between parties in what’s called the over-the-counter market.