Oct. 23–A new oil pricing benchmark launched Monday that could make Houston the new hub for U.S. oil pricing.
The commodities trading firm Intercontinental Exchange Inc, initiated the West Texas Intermediate pricing guide that will price oil based on volumes produced from the Permian Basin and delivered to Houston’s refining and export hub. The new ICE Permian WTI futures contract will price West Texas oil delivered to Magellan Midstream Partners’ large terminal in East Houston along the Houston Ship Channel.
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.
The Houston futures contract is another sign of the Gulf Coast’s emergence as a global hub on energy exports rivaling the Middle East. West Texas’ booming Permian Basin is producing a record of 3.5 million barrels of oil a day — nearly one-third of the nation’s total. With those rising volume, much more oil is headed to export destinations out of Houston and Corpus Christi.
Increasing volumes of liquefied natural gas, natural gas liquids and petrochemical products are also being shipped to global markets from Houston and other Gulf Coast ports. U.S. crude exports have climbed to an average of nearly 2 million barrels day, most shipped from the Gulf Coast.
“Permian crude exports from the U.S. Gulf Coast increasingly define the oil market for the world’s largest producer, so I’m not surprised to see a Houston contract,” said Ethan Bellamy, an energy analyst at Robert W. Baird & Co. “Financial markets evolve to match risk in the physical markets. This is a natural evolution as U.S. crude exports grow.”
At least three projects are proposed for the Texas Gulf Coast to allow some of the world’s largest oil tankers, capable of carrying up to 2 million barrels of crude, to be fully loaded. They include two offshore loading terminals, proposed by Enterprise Products Partners of Houston and the Swiss company Trafigura, and an expansion by the Port of Corpus Christi, which would develop a loading and storage complex on Harbor Island, near Port Aransas.
“We’re offering customers a trusted standard for WTI straight from the Permian Basin, and over time, it’s one that we think could develop into a benchmark for other grades to price around,” said Jeff Barbuto, vice president of oil markets at ICE.
Correction: An earlier version of this story misidentified the parent of NYMEX. It is CME Group.
(c)2018 the Houston Chronicle
Visit the Houston Chronicle at www.chron.com
Distributed by Tribune Content Agency, LLC.