Brazil to become swing producer: Shell trading

OREANDA-NEWS. May 11, 2016. Brazil is emerging as a "very big swing crude" producer that will help to determine the price of oil in Asia-Pacific, according to Shell's vice president of crude trading and supply.

Pricing of Brazilian crude is best served by Dated Brent, which remains "a very robust benchmark that truly reflects physical value in the Atlantic basin," Shell's Mike Muller said at the Argus Rio Crude Conference today.

The Dubai benchmark, in contrast, has "inefficiencies" and does not meet benchmark criteria, including a variety of buyers and sellers, transparency and consistent and uniform quality. Dubai needs more tradability in addition to oversight and regulation, Muller said. Dubai has "big room for improvement," as the market is "too fuzzy."

The Brent-Dubai spread is likely to widen, Muller said, reflecting growing production from Iran and Iraq and the lack of an Opec accord on production levels. This will be tempered by growing demand from the Middle East itself, he added.

Shell is currently producing more than 200,000 b/d of Brazilian crude, including output from BG. One challenge in the Brazilian operating environment is logistics, particularly with ship-to-ship transfers, Muller said.

"When we get assurances, we expect stability in the rules of the game," he said.

Muller said he is heading to China shortly to promote Brazilian crude.