The US Gulf Coast: Where demand for Midland crude converges
The US Gulf Coast is among the most liquid and transparent crude markets in the world. More than 4mn b/d of refining capacity exists in close proximity to more than 1mn b/d of crude export dock capacity in the Houston area. This nexus of demand presents ideal conditions for pricing the growing volume of Midland-quality crude arriving on new and expanding pipelines. As Houston’s infrastructure builds out, market participants are looking for an outright price index that captures both waterborne and pipeline trades for this Midland-origin crude as it trades at Houston. The Argus American GulfCoast Select (AGS) index is a comprehensive price that represents the alternative markets of waterborne and refinery demand at the Houston hub.
About Midland-quality crude at Houston
As the Houston market for Midland-quality crude has matured, a fungible barrel of agreed quality has emerged. At both ECHO and MEH –- as well as at the associated EHT, Texas City and Seabrook docks -- crude labeled as Midland-quality WTI at these terminals is reported into the Argus AGS index.
ARGUS WTI Houston assessment at MEH
- Argus will continue to publish WTI Houston daily as both a differential to Cushing and as an outright price.
- The existing Argus WTI Houston price index at MEH will continue to be used as the settlement mechanism for the HTT and ACM financial swaps.
- MEH trades currently included in the Argus WTI Houston index will also be part of the pool of pipeline and waterborne trades setting the AGS index.
While AGS will initially be launched to include these Houston-area locations, we are actively monitoring similar locations at Corpus Christi, Nederland, Clovelly and St. James, and will consider including these locations when they meet certain requirements.
How will pipeline and waterborne trades from different locations be included?
Both pipeline and waterborne trades are normalized for both volume and location.
Pipeline trades (typically traded in barrels per day for pipeline delivery throughout the delivery month) will be converted to an outright month volume. For example, a pipeline trade done for 1,000 b/d (pipeline) would be converted to an outright volume of 30,000 bls.
Waterborne trades are normalized as if they were done for delivery at Enterprise’s ECHO terminal just south of the Houston Ship Channel. Historical data show that trades at the various locations in Houston have fairly constant price differentials from each other. Historical spreads between locations over the prior three months guide our conversion factors to normalize trades to ECHO. For example, if a trade at EHSC is typically valued at a 50 cent/bl premium to ECHO, Argus would normalize a $41/bl trade at EHSC to $40.50/bl before including it in the AGS index.
All of these mechanisms are described in detail in our published Argus Americas Crude methodology.
Access the AGS assessment
This assessment is available in two of our flagship crude oil publications.
ARGUS Americas Crude
The ARGUS Americas Crude service provides market information and price transparency to the US Gulf Coast markets, as well as to markets in the US midcontinent, US west coast, Canada, South America and other pricing centres in the Americas.
The Argus Crude service is a must-have source for daily news, prices and analysis for over 80 different internationally-traded crude streams.
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