An aerial view of a crude oil storage facility is seen on May 5, 2020 in Cushing, Oklahoma.
JOHANNES EISELE | AFP via Getty Images
Two leading oil price reporting agencies separately released new US crude benchmarks on Friday as part of an effort to rival the West Texas futures contract in the United States.
The move from S&P Global Platts and Argus Media comes as both agencies seek to separate from the traditional landlocked system, just over two months after US crude oil futures fell into negative territory for the first time in history.
S&P Global Platts said its new benchmark for US crude, called Platts American GulfCoast Select (AGS), would reflect the value of light, water-based sweet crude supplied from the Permian Basin in western Texas and New Mexico in the main pipes of the Gulf.
The new direct assessment of Argus’s daily crude oil price, Argus AGS, is also designed to reflect the growing importance of the US Gulf Coast as a major export hub and to address current market concerns about the point. Landmark WTI Crude Oil.
Agencies will use different methodologies for their respective new price evaluations.
International benchmark Brent crude futures were trading at $ 41.15 a barrel on Friday afternoon, around 0.3%, while US WTI futures were at $ 38.63, 0.2% less. Both oil contracts are on track for a weekly drop of more than 1.5% after record US crude inventory data on Wednesday dragged prices lower.
Why are these price assessments being launched?
Brent is priced on an island in the North Sea about 500 meters from the water, where tanker storage is accessible. In contrast, the WTI drop-off location is landlocked and located 500 miles from the water in Cushing, Oklahoma.
This difference was thought to have illustrated an important point in late April, as the crash of the coronavirus caused oil prices in the United States to drop, energy analysts at Goldman Sachs said at the time.
They argued that crudes in the water, like Brent, were much more isolated from the pandemic because they had relatively easy access to tanker storage than landlocked price grades, such as those in the US, Canada, and Russia.
An aerial view of tankers anchored near the ports of Long Beach and Los Angeles amid the coronavirus pandemic on April 28, 2020 off the coast of Long Beach, California.
Mario Tama | fake pictures
The Cushing center consists of a network of nearly two dozen pipelines and 15 storage terminals, according to CME Group. The center has a storage capacity of 90 million barrels and is often referred to as “The World’s Pipe Crossroads.”
S&P Global Platts said in a statement that it had decided to launch AGS by receiving feedback from producers, consumers, traders and others in the US oil market, calling for a new benchmark for the price of crude oil that directly reflects the value of crude oil. sweet from usa
Vera Blei, global oil director at S&P Global Platts, said AGS would bring “a Brent of its own” to the US market.
“This new benchmark reflects the value of US crude oil that is in the water, connected internationally and free from distortions in the economy of domestic infrastructure,” he added.
‘Black april’
On April 20, WTI oil futures fell into negative territory for the first time on record, dropping as low as $ 40 a barrel negative, as the economic consequences of the pandemic led to an unprecedented demand shock.
IEA Executive Director Fatih Birol reportedly suggested that 2020 may come to be seen as the worst year in the history of world oil markets, and “Black April” is probably the worst month ever experienced by the industry.
“The US crude oil market has been calling for an alternative to the discredited logistics of Cushing, Oklahoma,” Richard Swann, editorial director for America for S&P Global Platts, said in a statement.
“For several years, Cushing has not represented the crude oil economy in this market. Market participants have called for a benchmark that correctly reflects the core of the physical market on the Gulf coast, rather than a landlocked financial value “he added.
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