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post #1 of 4 (permalink) Old 10-29-2009, 11:19 AM Thread Starter
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This isnt good!

Saudis drop WTI oil contract
By Javier Blas in London
Published: October 28 2009 20:27 | Last updated: October 28 2009 20:27

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

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post #2 of 4 (permalink) Old 10-29-2009, 11:55 AM
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Non-issue. The Saudis are switching from the Platts physical index to the Argus physical index. Both trade at differentials to the WTI futures price making the WTI futures price the underlying item.

Saudis are still selling oil in dollars. Their concern was with the build up in inventories at Cushings made it so WTI wasn't reflective of world oil prices.

There is a huge different between the physical quote price and the contract (futures) quote price.

NYMEX ain't going anywhere and neither is the WTI futures contract.

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post #3 of 4 (permalink) Old 10-29-2009, 11:58 AM
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A better much less alarming press release.

Quote:


HOUSTON, LONDON AND SINGAPORE, Oct. 28 TX-Argus-Media


HOUSTON, LONDON AND SINGAPORE, Oct. 28 /PRNewswire/ -- Saudi Aramco announced today that it will begin using the Argus Sour Crude Index (ASCI) published by Argus Media as the benchmark price for all grades of crude oil sold to US customers.

Saudi Aramco has used WTI crude prices published by McGraw Hill's Platts as the benchmark for crude sales to the US since 1994. 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 1.5mn b/d of crude to the US last year, second only to Canada.

The Argus Sour Crude Index (ASCI) was launched in May this year to represent the daily value of US Gulf coast medium sour crude, based on physical spot market transactions. The daily ASCI price is the volume-weighted average of all deals done for three grades of crude combined: Mars, Poseidon and Southern Green Canyon.

Saudi Aramco will publish a monthly price differential to a month's average of the daily ASCI price published by Argus. Argus prices are already extensively used in the US midcontinent and Gulf coast crude markets to price long-term supply contracts.

"This move by Saudi Aramco shows that Argus' approach to assessing crude prices is correct," Argus Media chairman and chief executive Adrian Binks said. "Argus creates volume-weighted averages of the entire day's physical market trading to create the ASCI. This clearly is the most transparent and robust method available for such active markets."

US Gulf output of 1.2mn b/d is expected to climb to 1.4mn b/d next year and 1.9mn b/d in 2013, boosting spot market trading volumes in the market and focusing attention on the US Gulf as a centre of price discovery.

US sour crude continues to use WTI as a price reference, but responds quickly to global market dynamics whenever WTI becomes dislocated from world crude prices. When high inventories at WTI's trading hub of Cushing pushed down WTI's value against other world crudes in the first quarter of this year, Gulf coast sour crude differentials to WTI responded to track other world sour crude prices.

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post #4 of 4 (permalink) Old 10-30-2009, 12:51 AM Thread Starter
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Im sorry to alarm anybody... All is well All is well

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