Crude Summit: Overseas WTI trading grows: CME

Overseas trading in WTI contracts have risen with growing US crude exports, as buyers seek to better manage risks, according to CME managing director for crude and refined products Peter Keavey.

Of the 1.2mn contracts/day of WTI contracts traded in 2019, 25pc were overseas, outside of the US trading hours of 8:30am to 2:30pm ET, Keavey said. That compares with 11pc in 2015 on a much smaller base of 700,000 contracts/day. When a barrel of US crude heads overseas, to Asia or any other destination, the pricing risk that underpins that cargo goes with it.

"Whether we like it or not, the benchmark gets exported," he said at the Argus Americas Crude Summit in Houston, Texas. "The market is growing and it is certainly growing out of the traditional US hours."

The futures market continues to grow, and so is open interest and liquidity. The WTI contract has continued to outpace other contracts, and it is a leading benchmark for crude pricing in the world, he said.

With the expansion in the customer base, the price discovery grows across the globe. That means that traders and hedgers are getting a much more robust price discovery in Asian and European hours, along with real-time risk management during those overnight hours.

"There is no denying that the export of the US barrel has really driven this expansion," he said. "It offers much more effective risk management."

US exports regularly top 3mn b/d, almost all of which leaves from terminals around the ports of Houston, Beaumont or Corpus Christi, Texas. Growing US crude flows are changing pricing behavior in European and Asian markets.

By Manash Goswami