The ARGUS Western Canadian Select price indices
The rising supply of heavy Canadian crude at the Gulf coast has created conditions supporting new heavy crude benchmarks: Argus WCS Houston and Argus WCS Cushing.
The two most commonly traded Canadian heavy grades at the Gulf coast, Western Canadian Select and Cold Lake, are similar in quality and typically trade within a 5¢/bl range of each other in the high-complexity refining centres of east Texas. Pooling trades of these two grades creates robust price indices in Houston and Cushing.
Argus WCS Houston – Trades of WCS and Cold Lake are typically done at parity at three Houston locations: Enterprise’s ECHO, Energy Transfer’s Nederland and Phillips 66’s Beaumont terminal.
Although trade of WCS can be thin at the Gulf coast, the trade of Cold Lake is consistently much more robust. That is why including the liquid spot trade of similar-quality Cold Lake at Houston-area terminals is so valuable to ensuring that the Argus WCS Houston price index is based on robust physical spot trade every month. The Argus WCS Houston price index not only represents robust spot physical trade, but it is hedge-able via financial contracts on both major exchanges. These financial contracts settle on the month average of Argus WCS Houston daily published prices.
Argus WCS Cushing – The Argus WCS Houston assessment has seen the most rapid recent rise in liquidity, but trade of WCS Cushing (Oklahoma) is also highly active, and trades are widely reported to Argus. The Argus WCS Cushing assessment also considers Cold Lake trades and encompasses trades done at any major terminal in the Cushing area.
WCS Hardisty – The WCS blended stream is created in tanks at Hardisty and actively traded there. Argus began assessing spot trade of WCS at Hardisty in 2006.
Advantages of the ARGUS WCS price indices
The Argus WCS Houston index is particularly valuable because it reflects daily trade in coastal heavy Canadian crude. Most other major heavy crude grades sold at the gulf coast are priced on government formulae not free market trade. Heavy Canadian crude at the Gulf coast regularly trades in small pipeline batches on a spot basis, providing exceptional transparency.
Thanks to financial contracts settling on the Argus WCS Houston and WCS Cushing month average price indices, these contracts are also precisely hedge-able.
Chart callout: As the chart above shows, the WCS price at Hardisty has been much more volatile than the prices of WCS Cushing or WCS Houston. Pricing on WCS Houston not only references the end user market, but it also reduces exposure to the volatility at Hardisty.