* Dwindling supply underpinning Brent is “major problem”
* Platts says more crudes may be needed in 2-5 years
* New Brent tweaks announced by Platts, starting in June
By Dmitry Zhdannikov and Alex Lawler
LONDON, Feb 17 (Reuters) - The Brent crude global oil benchmark needs fundamental and immediate reform due to dwindling North Sea output, the world’s biggest oil trader said on Monday.
The comments by Vitol Chief Executive Ian Taylor add urgency to a long-running debate about Brent, which critics have said is vulnerable to manipulation. European authorities last year started a probe into suspected manipulation of oil prices.
Taylor said the Brent benchmark, which is currently calculated using four North Sea crude grades, should be broadened to include grades from West Africa, Kazakhstan, Algeria, maybe Russia and even the United States.
“As an industry we have a major problem here that we have to solve,” Taylor said at an IP Week industry conference on Monday.
Brent is used to price about two thirds of the world’s crude oil. It is underpinned by four North Sea crude streams - Brent and Forties from the British side, and Norway’s Ekofisk and Oseberg (BFOE).
Output of these four grades has fallen by more than 20 percent in the past four years to below 1 million barrels per day in February, according to Reuters data.
While the physical volume has dwindled, the futures contract has become more widely traded.
Platts, a unit of McGraw Hill and the dominant oil pricing agency, also says changes may needed but not immediately. On Monday it said oil from outside the region would be required only if North Sea supply does not expand rapidly.
Britain’s oil output peaked in 1999. Norway is planning to revive production after a decade-long decline, although a major field in the effort, Johan Sverdrup, will not start up until 2019.
“We need to add similar grades from outside the region over the next two to five years if the new Norwegian production is not significant,” Jorge Montepeque, Platts editorial director for market reporting, told a news conference at IP week.
This would mean looking at large crude streams from central Asia, north Africa, West Africa and the Baltics - crudes that are normally delivered into Europe, he said.
Vitol’s Taylor said the problem is an urgent one, however, which needs to be addressed “tomorrow”.
A year ago and following an industry debate, Platts reformed the Brent benchmark in a bid to make it easier for North Sea crudes other than Forties - the largest and usually the cheapest of the four - to be delivered into contracts.
It did so by applying quality premiums to the better-quality Oseberg and Ekofisk crudes and said on Monday the system could in future be used to include other crudes.
Platts also said on Monday the reform had worked and separately announced it would implement minor changes to the way the premiums are calculated from June.
Thomson Reuters, parent of Reuters news, competes with Platts in providing news and information to energy markets.