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* Brent futures curve likely to flatten, analysts say
* Harder for companies to corner the market
* Changes will widen supply base
By Christopher Johnson
LONDON, Feb 15 (Reuters) - Spot Brent crude oil prices arelikely to fall relative to forward futures due tocontract changes imposed by Royal Dutch Shell and BP, analysts said on Friday.
Shell announced last week it would apply a quality premiumfor forward contracts from May onwards in the physical crudemarket on which Brent futures are based.
The reforms to BFOE - cash forward deals in the North Seacrudes Brent , Forties , Oseberg andEkofisk crudes - will widen the supply base and make itharder for companies to corner the market, analysts say.
Nearby Brent futures are most likely to be affected once thechanges come into affect, and this should flatten the North Seacrude futures curve, which is now in steep backwardation withprompt prices at a significant premium to later contracts.
"It should be slightly bearish for the Brent curve for thesimple reason that there will be more liquidity in the BFOEmarket," Tamas Varga, an oil analyst at London brokerage PVM OilAssociates, said.
The forward Brent curve already appears to have responded tothe changes, with the spread between June and July Brent futures- the first to be affected by the reforms - narrowing slightly.
The June/July Brent spread closed at 81 centson Feb. 8, when Shell announced its changes, but has sincefallen to around 76 cents, a trend that analysts say is likelyto continue.
The cheapest of the four BFOE crudes - usually Forties - hasset the value of dated Brent.
Forties output is in natural decline, however, and supplyhas often been disrupted by outages at oilfields includingNexen's Buzzard oilfield, Britain's largest, boostingprices and raising questions about the credibility of thebenchmark.
IMPROVE LIQUIDITY
Shell and traders say the new mechanism will encouragemarket participants to deliver the full range of eligible BFOEcrudes by allowing them to adjust prices to reflect thedifferent quality of each.
Over time, these may not be restricted to just the four BFOEgrades. Traders say there is the potential to include more -even from outside the North Sea - so long as they are of aspecification that would value the grade above Forties, aretraded free on board and have significant volume.
Meanwhile, a growing flow of Forties to South Korea -encouraged by a trade pact with the European Union - hassupported prices and helped keep the Brent market inbackwardation.
Allowing more grades and cargoes to be used could lessen theimpact of this arbitrage trade to South Korea.
There will now be a mechanism giving "price manipulators alittle less wiggle room to the upside when situations like theSouth Korea trade agreement emerge", one senior trader said.
Amrita Sen, chief oil analyst at London-based consultancyEnergy Aspects, said the changes to the North Sea contract are"likely to impact the shape of the curve, as arguably thecontract becomes less reliant on Forties as you can deliverother cargoes when Forties is sold out.
"It will generally improve liquidity," Sen said.
VTB Capital oil strategist Andrey Kryuchenkov agreed:
"I doubt it will immediately flatten the curve but certainlywill have an effect," he said. "In the future, time spreads atthe front end will simply have a little more (supply) to playwith."
