Global energy and commodity news and price reporting agency Argus today launches its much-anticipated assessment for West Texas Intermediate (WTI) crude oil delivered to Houston.
The new price assessment, based at Magellan’s East Houston terminal, marks a milestone in the development of light sweet crude markets at the US Gulf coast.
“A new spot market has emerged in the oil capital of the US,” said Euan Craik, Argus CEO Americas. “We have consulted widely and constructed the WTI Houston price in a way that reflects actual trade of a well-defined crude stream.”
Rising production in west Texas is flooding Houston with WTI, but traders of the light sweet crude have been forced to value it with distant benchmarks, like Louisiana’s LLS or Midland WTI, both also published by Argus. The new Argus WTI Houston assessment removes the basis risk inherent in using a more distant price benchmark.
The new assessment will be set by a volume-weighted average of all trades done during the day at Magellan’s East Houston terminal. This mirrors the methodology used for other Gulf coast crude prices published by Argus.
Nearly 500,000 b/d of WTI from west Texas arrives at Magellan East Houston, where the terminal operator puts it into segregated tankage and makes spot trade possible within those tanks. Blended “domestic sweet” crude is not allowed into those tanks, so the trades there reflect a very specific quality of crude.
Today’s launch of Argus Houston WTI complements widely-used Argus price indexes for LLS at St James and WTI Midland, giving each region of the US Gulf coast a local and liquid light sweet crude price benchmark. Traders of other sweet crude and condensate in the Houston area will now be able to refer to values set in the WTI market at Magellan East Houston as a clear signal of value.
Magellan's East Houston terminal currently has 4.5mn bl of crude oil storage capacity and the company is considering adding up to 5mn bl of additional storage capacity.
Argus WTI Houston will be published in the daily Argus Americas Crude and Argus Crude reports, and will be available through Argus Direct, the company’s online platform.