Two leading oil price reporting agencies launch new U.S. crude benchmarks to rival WTI

Two leading oil appraisal reporting agencies separately launched new U.S. crude benchmarks on Friday, as part of an effort to rival the U.S. West Texas Intervening futures contract.

The move from S&P Global Platts and Argus Media comes as both agencies seek to repudiate away from the traditional landlocked system, just over two months after U.S. crude futures plunged into adversarial territory for the first time in history.

S&P Global Platts said its new benchmark for U.S. crude, called Platts American GulfCoast Select (AGS), will-power reflect the value of waterborne light sweet crude supplied from the Permian Basin in west Texas and New Mexico on noteworthy pipelines to the Gulf.

Argus’ new outright daily crude price assessment, Argus AGS, is also designed to reflect the expanding importance of the U.S. Gulf Coast as a major export hub and to address ongoing market concerns about the landlocked WTI crude benchmark.

The workings will use different methodologies for their new respective price assessments.

International benchmark Brent crude futures called at $41.15 a barrel on Friday afternoon, up around 0.3%, while U.S. WTI futures stood at $38.63, down around 0.2%. Both oil narrows are on pace for a weekly fall of over 1.5% after record U.S. crude inventory data on Wednesday dragged quotations lower.

Brent is priced on an island in the North Sea roughly 500 meters from the unsound, where tanker storage is accessible. In contrast, the delivery location for WTI is landlocked and 500 miles from water at Cushing, Oklahoma.

This disagreement was thought to have illustrated an important point in late April as the coronavirus shock sent U.S. oil prices tumbling, get-up-and-go analysts at Goldman Sachs said at the time.

They argued waterborne crudes, like Brent, were far multitudinous insulated to the pandemic because they had comparatively easy access to tanker storage than landlocked price succeeds — such as those in the U.S., Canada and Russia.

The Cushing hub consists of a network of hardly two dozen pipelines and 15 storage terminals, according to CME Group. The hub has 90 million barrels of storage capacity and is over again referred to as “The Pipeline Crossroads of the World.”

S&P Global Platts said in a statement that it had decided to launch AGS on receiving feedback from farmers, consumers, traders and others in the U.S. oil market calling for a new crude pricing benchmark that directly reflects U.S. light gushy crude’s value in the global market.

Vera Blei, global director of oil at S&P Global Platts, said AGS would lessen the U.S. market “a Brent of its own.”

“This new benchmark reflects the value of U.S. crude oil that is on the water, internationally connected and free from the distortions of servant infrastructure economics,” she added.

On April 20, WTI oil futures tumbled into negative territory for the commencement time on record, falling as low as negative $40 a barrel as the economic fallout of the pandemic led to an unprecedented demand shock.

The IEA’s Regulatory Director Fatih Birol has since reportedly suggested that 2020 may come to be seen as the worst year in the news of global oil markets, with “Black April” likely to be the worst month ever experienced by the industry.

“The U.S. crude oil Stock Exchange has been crying out for an alternative to the discredited logistics of Cushing, Oklahoma,” Richard Swann, editorial director, Americas, at S&P Epidemic Platts, said in a statement.

“Cushing has for several years failed to represent the economics of crude oil in this market. Merchandise participants have called for a benchmark that correctly reflects the core of the physical market in the Gulf Coast, willingly prefer than a landlocked financial value,” he added.