Sparked by the United States lifting a 40-year ban on crude oil exports in late 2015, the CME Group and Argus have both joined the U.S. Gulf Coast competition to provide contract deliverable oil futures to traders.

“It’s going to be a primarily commercial contract to start with – we’re seeing this as something that will be of interest to producers, exporters and importers,” said Owain Johnson, managing director of energy research at CME.

“The U.S. export market has needed an independent source of pricing to value light sweet crude exports,” Argus Media chairman and chief executive Adrian Binks said in a statement. “The new Argus WTI fob Houston price provides that solution for the oil trading community.”

WTI Houston contract specifications will be about 40-44 degrees API gravity and 0.275 percent sulfur.

Suppliers, refiners and end users of U.S. crude oil will have a new way to price and hedge WTI light sweet crude oil in Houston beginning in Q4 2018.

CME Group will offer a new WTI Houston Crude Oil futures contract with three physical delivery locations on the Enterprise Houston system, pending regulatory review. WTI Houston Crude Oil futures will be listed with and subject to the rules of NYMEX, beginning with the January 2019 contract month.

The new WTI Houston Crude Oil futures contract expands CME Group’s crude oil futures and options and will complement the global benchmark NYMEX WTI Light Sweet Crude Oil futures.

Participants will have the flexibility to make or take delivery of U.S. light sweet crude oil at the Enterprise Crude Houston (ECHO) terminal, Enterprise Houston Ship Channel (EHSC) or Genoa Junction through the new contract.

Argus is publishing a price for waterborne U.S. crude exports — Argus WTI fob Houston — that bridges the gap between the U.S. domestic pipeline market and international shipments to five continents.

The Argus WTI Houston price, launched three years ago, is already the benchmark for much of the light sweet crude traded across North American pipeline networks. The new Argus WTI fob Houston price now adds transparency to the waterborne market.

U.S. crude exports climbed to a record 2.2 million barrels per day in June, more than doubling from an average of less than 1 million barrels/day in the first half of 2017, U.S. government data show. More than 40 percent of US crude exports have reached Asia-Pacific destinations so far this year, and more than 30 percent of shipments have gone to Europe.

“Houston’s importance as a trading and export hub for physical crude oil from Cushing and the Permian Basin continues to evolve due to the shale oil revolution and repeal of the crude oil export ban,” said CME Group Global Head of Energy Peter Keavey.

“The WTI Houston contract offers commercial customers and physical traders a way to hedge their physical price risk, enhances the transparency of U.S. crude oil prices on the water in Houston and reinforces the strength of our global benchmark WTI Cushing contract.”

Enterprise is ready to handle 4 MBOPD from the Gulf Coast

Enterprise has a network of 19 ship docks along the Gulf Coast and is the largest exporter of crude oil in the U.S. and the ideal provider of delivery points for this physical WTI Houston futures contract. Through its network of pipelines, storage and marine terminals, the firm has the capability to handle the flow of more than four million barrels per day of crude oil. Participants will also benefit from access to a diverse group of refiners, storage facilities and export facilities through the Enterprise network.

Unlike the U.S. inland pipeline markets, pricing of export waterborne cargoes has generally been opaque, clouded by complexities around logistics and quality.

Introducing transparency

The new price will introduce transparency to the export market for light sweet crude, Argus said.

“It will complement established Argus benchmark indexes for pipeline WTI Houston and WTI Midland, both of which are used extensively in physical transactions and underpin actively traded futures contracts on the CME and Ice commodity exchanges,” Argus said in a webcast.

The new price will be for cargoes of 500,000-650,000 barrels loading at marine terminals in the Houston area. Prices for other US export grades and locations will also be launched over the next year. These assessments will be for cargoes loading 15-45 days ahead and will be priced as a differential to the Nymex light sweet crude contract.

 


Legal Notice