Magellan Midstream Partners LP and Enterprise Products Partners LP plan to combine forces to develop a futures contract for the physical delivery of crude oil in the Houston area, after two years of separately working on contracts with exchanges.

The midstream infrastructure companies said on Jan. 21 the project is in response to market interest for a Houston-based index with greater scale and price transparency.

Quality specifications will be consistent with WTI crude oil originating from the Permian Basin, with delivery capabilities at either Magellan's East Houston terminal or Enterprise's ECHO terminal.

Houston represents the most comprehensive and complete market for Permian WTI and is the most logical physical location to establish a new futures contract, Magellan spokesman Bruce Heine told Reuters.

"We have both been trying to develop our own futures contracts, to various degrees of success. What has become clear is that we can provide a better overall market solution by working together which benefits all market participants."

The WTI contract is the benchmark for U.S. crude oil prices.

Enterprise spokesman Rick Rainey said the decision on which platform will host the futures contract is still under evaluation.

In 2018, the Intercontinental Exchange launched a WTI contract with price, settlement and delivery at Magellan's terminal in East Houston.

Enterprise separately agreed to use its Houston hub for a WTI futures contract with CME Group Inc.