Argus launches new US Gulf coast crude assessment

Argus has today launched a new outright daily US crude price assessment for waterborne and pipeline trades of Midland-quality WTI at the US Gulf coast, providing market participants with an alternative benchmark to landlocked WTI Cushing.

Increased volumes of WTI are being directly piped from the Permian basin and traded at the US Gulf coast, and the new Argus AGS (American GulfCoast Select) index will enable industry participants to base their trades on a benchmark price that reflects a wider and more representative set of fundamentals than those at the inland Cushing storage and trading hub. The assessment will initially cover the Houston area, but is expected to expand to cover Corpus Christi, Louisiana and new sources of Midland-quality WTI, Argus says.

Midland-quality WTI traded at Houston can either be delivered to the 4.4mn b/d local refinery network or become part of the roughly 3mn b/d of crude that leaves the US Gulf coast by water.

The Argus AGS index will be published as an outright price, known as the Argus AGS Marker, but also as a differential to the Cushing contract to accommodate those that hedge using Nymex futures.

Price reporting agency Platts has launched a similar assessment.

There have been concerns dating back several years over the frequency with which the futures-based WTI benchmark becomes divorced from global oil markets, and these questions were revived in April when the Nymex May WTI futures contract traded below zero, briefly reaching minus $37.63/bl, a day before expiry on 20 April as surplus supply threatened to outstrip available storage capacity at Cushing.

At the same time, the huge growth in US crude production over the past decade, coupled with Washington's removal of crude export restrictions in 2015, has driven the emergence of the US Gulf coast as a domestic and international trading centre for high-quality crude from the Permian basin.