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Bloomberg: Dated Brent Falls Most in 2 Months as Shell Offers Forties Oil

By Alexander Kwiatkowski

Sept. 18 (Bloomberg) — Dated Brent declined the most in more than two months relative to the cost of November oil after Royal Dutch Shell Plc offered to sell a cargo of the benchmark Forties crude.

Dated Brent for loading in 10 to 21 days was at a discount of 15 cents to the cost of November oil, compared with a premium of 72 cents yesterday, according to data from PVM Oil Associates Ltd. That’s the biggest drop since July 9. Physical crude oil for November delivery was at $76.95 a barrel at 9:55 a.m. London time, according to PVM.

Dated Brent is set by the cheapest of four crude grades: Shell’s Brent blend, the BP Plc-operated Forties, Norsk Hydro ASA’s Oseberg and the Ekofisk blend, which is operated by ConocoPhillips. It’s used to price about two-thirds of the world’s oil, from Europe, Africa and Russia. Forties is currently the cheapest grade.

Shell didn’t sell a cargo of Forties loading between Sept. 26 and Sept. 28 after offering it at a discount of 15 cents to November oil, the company said.

As a result, the so-called Forties differential, the spread between the cost of a Forties cargo loading in 10 to 21 days and a forward price for oil, was at a premium of 17 cents, compared with 70 cents yesterday.

`Contango’ Returns

The North Sea market has moved into so-called contango, according to Bloomberg data, whereby cargoes are cheaper for near-term delivery than they are in subsequent months. This indicates that in the near-term, the supply of oil is greater than demand, and prices are subsequently weaker.

“Brent is experiencing relative weakness,” said Harry Tchilinguirian, a senior oil market analyst at BNP Paribas in London, said in a note today. “North Sea schedules are rising, European refiners are also moving into maintenance.”

As much as 590,000 barrels a day of northwest European refinery production is expected to be lost to maintenance in October, rising to 785,000 barrels a day in November, PVM said in a research note today.

This will coincide with an increase in supply as the biggest North Sea fields produce more. Daily shipments of the four crude grades that determine Dated Brent will increase 7.4 percent in October compared with September, to 1.53 million barrels a day, according to Bloomberg calculations based on loading schedules.

To contact the reporter on this story: Alexander Kwiatkowski in London at [email protected]

Last Updated: September 18, 2007 09:21 EDT 

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