ICE launches futures contract based on Permian WTI crude

July 17, 2018 12:35 PM
ICE launches futures contract based on Permian WTI crude

ICE launches futures contract based on Permian WTI crude

Intercontinental Exchange Inc. (ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced plans to launch a physically delivered Permian West Texas Intermediate (WTI) crude oil futures contract, deliverable in Houston, Texas.

The Houston delivery point has become the pricing center for U.S. crude oil production and exports, and the new flat price futures contract is designed to serve hedging and trading opportunities in this growing market. The contract is expected to launch on ICE Futures U.S. in the third quarter, subject to regulatory review.

With the growth in shale oil production in the Permian basin in West Texas, which is now estimated at 2.8 million barrels a day, and increased U.S. exports alongside growing Asian demand for light sweet crude oil, Houston has become the central delivery point for U.S. crude. The ICE Permian WTI futures contract is designed to provide price discovery, settlement and delivery at Magellan Midstream Partners (MMP), L.P.’s (NYSE: MMP) terminal in East Houston.

“The U.S. Gulf Coast, with Houston as its trading hub, is the natural delivery point for a North American crude oil benchmark based on WTI from the Permian Basin,” said Jeff Barbuto, Vice President of Oil Markets at ICE. “We’re excited to work with Magellan to offer a new tool for price discovery and risk management for U.S. crude production and exports. The recent price divergence between Cushing-based WTI and Brent is a reminder that although Cushing is a marker for local crude fundamentals in the midcontinent, it diverges for pricing waterborne U.S. crude. We are working with the market to provide a reliable and predictable quality specification and location that is relevant to global crude pricing, and accessible for domestic and foreign buyers alike.”

“We are pleased that ICE has selected Magellan’s East Houston facility as the delivery point for the Permian WTI futures contract, creating liquidity in the Gulf Coast crude oil market and increasing demand for the region’s pipeline and storage services,” said Robb Barnes, Magellan’s Senior Vice President of Commercial, Crude Oil.

ICE is home to the world’s leading global crude and refined oil markets. Half of the world’s oil and refined futures are traded on ICE’s markets, including futures and options on the global benchmark ICE Brent, the U.S. benchmark West Texas Intermediate (WTI) crude, the Asian benchmark Platts Dubaicrude, Gasoil, Heating oil and RBOB Gasoline, as well as more than 500 additional grades and oil products.

Intercontinental Exchange (NYSE: ICE) is a Fortune 500 and Fortune Future 50 company formed in 2000 that serves customers by operating the exchanges, clearing houses and information services they rely upon to invest, trade and manage risk across global financial and commodity markets.

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