A major oil boss has called for the brent oil price benchmark to be updated, as it is no longer representative of the supply and demand of the commodity worldwide.
Ian Taylor, the chief executive of Vitol, which is the world's largest oil trading firm, stated that other global oil trading prices ought to be included in the benchmarking.
Platts, the price reporting agency, added a change to the brent oil price benchmark might be needed in the future, but said this is not necessary yet. Seth Klein, leading oil analyst at Citigroup, also weighed in on the debate by calling the brent oil price benchmark "broken".
Mr Klein said: "I would not say that it is massively misleading. It's not that the world is awash with oil and Brent [doesn't fall]. But when you do get softness in the Asia markets, when you do get a big surge in Brazilian production, when you do see the US imports dropping off a cliff because shale oil production is going through the roof, Brent doesn't seem to move at all. Nothing moves the needle."
Speaking at the International Petroleum Week conference in London, Mr Taylor admitted that he is becoming increasingly worried about the role in benchmarks in setting global oil prices.
"We, as an industry, have a major problem here that we need to solve," he said, adding that the benchmark ought to include grades of oil from all over the planet, including Africa, Kazakhstan, Algeria and Russia.
Jorge Montepeque, Platts editorial director of its market reporting division, stated at a news conference recently that similar grades from outside the region need to be added to the benchmark over the next two to five years if the new Norwegian production is not significant.
Mr Klein added: "It's a lot easier to move this market up than down, and all in all it's a contract that doesn't reflect the ups and downs of supply and demand."
Citigroup stocks fell by 0.28 per cent in the US yesterday (February 18th) and slipped by a further 0.12 per cent in after-hours trading on the New York Stock Exchange.
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