Kuwait Could Switch To Argus Pricing For Oil From WTI-Sources
By Dania Saadi, Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Kuwait could switch the pricing of its crude sold to
U.S. customers to the Argus Sour Crude Index, or ASCI, from Platt's West Texas
Intermediate, or WTI, following in the footsteps of Saudi Arabia, Kuwaiti oil
officials said.
"Kuwait could look at it definitely because we don't think the pricing peg
today to the WTI is really representative of the market," a senior Kuwait oil
official told Zawya Dow Jones.
Saudi Arabia, the world's biggest oil exporter, has dropped the longtime WTI
benchmark, which is based on a formula tied to light, sweet crude futures traded
on the New York Mercantile Exchange, or Nymex. State-owned Saudi Arabian Oil Co.
will implement the new policy for January oil sales to the U.S.
London-based Argus Media launched the ASCI in May this year to reflect the
U.S. Gulf coast medium sour crude, where growing production from the region has
given a boost to alternatives to the WTI assessment.
Saudi exports to the U.S. are closer to medium sour crude produced in the Gulf
of Mexico, which has a lower-quality oil with higher levels of sulfur than the
sweet, light oil.
"Kuwait is usually in line with Saudi Arabia activity," another Kuwaiti
official said. "The switch is in our favor because it relatively reduces
volatility in the WTI and it is more transparent and reflects what is happening
in the market."
Argus officials couldn't be reached for comment.
STORAGE CRUNCH
Argus and rival Platts, a unit of McGraw-Hill Cos (MHP), have argued for years
that growing production in the Gulf of Mexico makes the region better-suited for
setting oil prices than Cushing, Oklahoma, the inland delivery point for barrels
underpinning the Nymex futures contract.
Saudi Arabia's shift could encourage other sour crude oil exporters to the
U.S. such as Venezuela and Iraq to follow suit and adopt the new assessment.
"WTI has been the benchmark but is suffering from issues related to the
specifics of the inland characteristics and we have seen very wide spreads in
WTI," said Olivier Jacob, managing director of Switzerland-based research group
Petromatrix.
"So it makes sense for the physical suppliers such as Saudi Arabia, Kuwait,
Iraq, etc to try and find a more stable alternative benchmark," Jacob added.
WTI pricing often reflects storage and pipeline capacity problems at Cushing,
Oklahoma, while oil from the Gulf of Mexico has several potential delivery
points and more pipeline routes out of the region, making a storage crunch less
likely.
Venezuela's oil minister Rafael Ramirez has already applauded Saudi Arabia's
decision to move away from WTI and said his country may do something similar.
The WTI benchmark has suffered from fluctuations due to the rampant
speculation on crude futures trading on the Nymex, the world's main platform for
oil trading.
Saudi Arabia exported over 1.5 million barrels a day of crude oil to the U.S.
in 2008, second only to Canada, according to figures from the U.S. Energy
Information Administration., or EIA.
Kuwait, one of the smaller oil exporters to the U.S., sent 206,000 barrels a
day of oil to the market in 2008, EIA figures show.
-By Dania Saadi, Dow Jones Newswires, +9714-364-4960; dania.saadi@dowjones.com
Copyright (c) 2009 Dow Jones & Co.
(END) Dow Jones Newswires
11-24-090803ET
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