July 17–A commodities trading firm plans to launch a new oil pricing benchmark based on West Texas production that’s delivered to Houston refining and port hubs.
The plan for Intercontinental Exchange Inc., called ICE, is to set up a more accurate benchmark for the global pricing of domestic oil now that the U.S. is exporting much of its crude overseas each day.
With most of the nation’s oil exports shipped from the Gulf Coast, ICE sees Houston as a more accurate delivery point than the current West Texas Intermediate benchmark that’s delivered to Cushing, Okla.Cushing is a major storage and trading hub nicknamed the pipeline crossroads of the world.
West Texas’ booming Permian Basin is producing a record volume of more than 3 million barrels of oil a day — about 30 percent of the nation’s total. Much of that oil is being piped to Houston and Corpus Christi hubs for refining and export purposes. The U.S. is exporting more than 2 million barrels of oil daily.
Cushing is no longer as reflective of that global trading activity happening along the Texas Gulf Coast, ICE contends. The Houston delivery point has become the pricing center for U.S. crude oil production and exports, so the new ICE futures contract for Permian oil shipped to Houston will launch by the end of September.
“The U.S. Gulf Coast, with Houston as its trading hub, is the natural delivery point for a North American crude oil benchmark based on WTI from the Permian Basin,” said Jeff Barbuto, ICE vice president of oil markets at ICE. “Although Cushing is a marker for local crude fundamentals in the midcontinent, it diverges for pricing waterborne U.S. crude.”
ICE said it will work with Tulsa, Okla.-based Magellan Midstream to base the new pricing benchmark on its East Houston terminal.
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