Saudi Aramco said its decision to dump the West Texas Intermediate crude oil price and adopt the Argus Sour Crude Index (ASCI) was due to “wild” variations in the barrels traded on the U.S. Gulf Coast and those priced WTI, according to Reuters:
“We were finding every month there were wild variations between the sour crudes that were traded on the spot market for lifting in the U.S. Gulf Coast … and the NYMEX or WTI priced (cargoes) at Cushing, Oklahoma,” Aramco’s Chief Executive Khalid al-Falih told Reuters on the sidelines of an inauguration event.
“We wanted to make sure our crudes were being priced off a marker that was representing similar characteristics in terms of sulphur content, gravity as well as the same geography which is the U.S. Gulf Coast.”
As the Times of London explains :
The Argus index is based on a weighted average of actual prices paid for three crudes pumped out of the Gulf of Mexico — Mars, Poseidon and Southern Green Canyon. These are “sour”, or high-sulphur, crudes, more like Aramco’s Arab Light, so the Argus price index makes a better match.
It is both a technical issue and a symbolic shift that strikes a blow to the dominance of the New York Mercantile Exchange, the London Telegraph notes, but it’s also a bit of a blow against Platts, a unit of McGraw Hill.
Aramco had previously used West Texas Intermediate prices published by Platts as its price. Argus Media, which produces the Argus index, has had a strong position in oil markets for some time but is going after Platts in the natural gas markets, too, with a new daily natural gas report and price indexes.