[Editor's note: A version of this story appears in the January 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]
There are new financial tools at the disposal of U.S. light, sweet oil producers that are chasing the higher prices associated with export markets. CME Group has launched a WTI (West Texas Intermediate) Houston futures contract with delivery to Enterprise Products Partners LP’s (NYSE: EPD) Houston system. Intercontinental Exchange Inc. has launched WTI trading with delivery to Magellan Midstream Partners LP’s (NYSE: MMP) East Houston terminal.
Trading of CME’s January 2019 contract began Nov. 5 and, in a thinly traded market typical of a newly launched contract, was $63.57/bbl in mid-November. This compared with WTI delivered to Cushing at $57.35, while Brent was trading at $66.90.
The CME-contract delivery options are to Enterprise’s Crude Houston (ECHO) terminal, its Houston Ship Channel (EHSC) facility or to Genoa Junction. The contract offers “a new way to price and hedge WTI light sweet crude in Houston,” CME reported, and “will provide a superior hedging tool for the expanding U.S. export market.”