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Now here's a real important story. If you are an oil trader, chances are you traded the New York Mercantile Exchange West Texas Intermediate (WTI) contract. World pricing of oil by the biggest exporters was based on the WTI contract.
Now, suddenly, Saudi Arabia has decided to drop the WTI contract as the benchmark pricing unit for its oil. It is substituting a contract called the Argus Sour Crude Index, which will track the price in the physical market of a basket of U.S. gulf coast crudes, including Mars, Poseidon, and Southern Green Canyon.
What caused this drastic change by Saudi Arabia? Normally WTI crude trades at a premium of $1.00 to $2.00 to Brent Crude. Last January, there was so much oil stored in Cushing, Oklahoma, that WTI fell sharply, selling at a discount of $12.00 to Brent. This threw the oil market into disarray, angering the Saudis. This prompted the change of contracts by the Saudis from WTI to the Argus Sour Crude index. Argus is a London-based company, hence most of oil trading by the big players will now shift to the Argus index in London.
Last year when oil traded up to $147.00 per barrel, the volume of futures contracts for WTI crude skyrocketed. Now one of the busiest trading pits on the NYMEX will probably go the way of the typewriter.
A NYMEX spokesman said that they plan to offer a "cash-settled futures contract" tracking the Argus index.
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Reader Comments (Page 1 of 1)
11-01-2009 @ 10:20PM
Yon said...
... Saudis are reliably unreliable. They feel the devaluating dollars they have accumulated give them the right to control all and everyone. And when they do not get their way... Next, when the sour index will turn against them (an infidel plot), they'll get pissed and switch again. They think pride, not practicality, not principles, not ethics, not religious principle although they claim it is their guiding light.
11-01-2009 @ 11:02PM
mike said...
sell american grain for 150.oo a bushel and beef for 150.oo a pound and stop giving them spare parts for the f15's we gave them and the next time iraq or iran invades stay home and buy cheap oil to feed the war machine instead of overthrowing a sovereign nation
11-02-2009 @ 9:19AM
Beltway Greg said...
Here let me help you out and please forward this to George W. Bush a.k.a and to his ex-BFF Bandar Bush. Newsflash: the Saudis are not our friends. They are ruled by a corrupt monarchy, but aren't they all, that would kick us to the curb in a minute if they could find another country that could take our place. (China?) They have an economy that is non-diversified and a way of life that is based on keeping almost everyone, except those members of the Saudi royal family that storm the globe whoring, smoking Cuban cigars, and sucking down Petrus, ignorant and down on the farm. Dubai = goodbye. All of the petocracies in the Middle East see that as a cautionary tale. What happens when the cash runs out? Their placation of Muslim radical elements will eventually be their undoing. And don't worry, oil may trade someplace else, but they really fear the US consumer. If we every got religion in terms of energy consumption and moved away from oil their robed butts would be on the next private 777 winging west to Washington to press palms and make nice. Till then though let's keep an entire region in the dark and help Fendi and Tiffany recover one gallon at a time. The only folks "Rocking the Casbah" will be the Clash, still the only band that matters!
And next time ask me how I really feel.