Saudi Aramco switches index
Saudi Aramco yesterday said its decision to adopt the Argus Sour Crude Index was due to “wild” variations in the barrels traded on the US Gulf Coast and those priced by West Texas Intermediate.
Saudi Aramco, the state oil company of the world’s top oil exporter, has used WTI crude prices published by McGraw Hill’s Platts as the benchmark for crude sales to the US since 1994.
These prices are closely linked with the US light sweet futures contracts CLc1 traded on NYMEX – the world’s main forum for often volatile and speculative oil futures trading.
The new policy will be in effect for January sales to the US.
This fundamental change in policy reflects the increased importance of the US Gulf coast sour crude market, in which both production and trading activity is rising sharply.
Saudi Arabia exported over 1.5m barrels of crude to the US last year, second only to Canada.
The Argus Sour Crude Index was launched in May this year to represent the daily value of US Gulf coast medium sour crude, based on physical spot market transactions.
Aramco’s chief executive Khalid al-Falih said: “We were finding every month there were wild variations between the sour crudes that were traded on the spot market for lifting in the US Gulf Coast… and the NYMEX or WTI priced (cargoes) at Cushing, Oklahoma.”
The switch would offer a viable solution for both Aramco and its customers, Falih said.
“The Argus index was a solution… we believe it is good for our customers, it’s good for us, it’s transparent and will solve the problems that we will see in the future,” he added.