New physical US crude grade prices as a differential to the ICE Midland WTI (HOU) futures contract

General Index (GX) is excited to announce the launch of 23 new physical crude grade prices as a differential to the ICE Midland WTI (HOU) futures contract.

In recognition of changes to the entire US oil landscape over the last 15 years, market participants now see the market pricing basis for US export barrels shifting to Midland WTI at the Gulf Coast (Houston). The current, outdated US crude pricing system is based on the market in Cushing – landlocked in the middle of the US, with no direct access for exporting to international markets – and based on a blended “domestic sweet” crude (or DSW) that is not highly sought, either domestically or internationally.

ICE’s Midland WTI (contract code: HOU) futures contract is the only liquid, physically delivered Midland futures contract, allowing participants with Dated Brent exposure to hedge Midland deliveries, with the option to take physical delivery of Midland barrels at two of the biggest terminals in Houston - the Enterprise Crude Houston (“ECHO”) and ONEOK’s Magellan East Houston (“MEH”) terminals. Houston, a major hub for both exports and US domestic refinery demand, now represents the most active crude trading hub on the USGC.

GX has launched more than 20 new relevant spot price indexes, reflective of different locations and grades, providing the perfect vehicle to transition from landlocked DSW to international Midland WTI (at Houston).

“We are delighted to launch these new prices based on ICE’s fast growing HOU futures which represent the benchmark price for Midland WTI crude pricing in the USGC. The market is at a point of change right now, and we believe that the addition of these new indices will help show the way for global participants who rely upon the US crude markets.”

Anthony Macaluso, Americas Managing Director, General Index

“Existing assessments only capture a small part of the Houston market whereas ICE HOU is priced and physically delivered at two of the biggest terminals in Houston. It’s great to see General Index take this step towards modernizing assessments for US crude grades. ICE HOU futures represent exchange-guaranteed on-spec Midland WTI crude. We are seeing more of the market recognize that they can better hedge their exposure and switch their hedging to be based off HOU.”

Jeff Barbuto, VP, Global Head of ICE Oil Markets

With these new prices, the market will be able to track and trade US pipeline crude markets vs Midland WTI at the Gulf Coast. Traders will also have the invaluable ability to hedge positions with the ICE HOU-based prices because the trade period is the same as those for futures contracts. These prices help reduce risks from a pricing basis unrepresentative of refinery runs and vulnerable to negative prices.

The new ICE HOU-based prices are not only highly relevant in the US, but also in any markets that pull crude from the US, especially the ARA region which has steadily been importing ever greater volumes of WTI to the point that it is now formally included in the Brent basket.

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