A new U.S. oil pricing benchmark is rapidly taking shape, threatening to further erode the dominance of the Nymex crude futures contract.
Argus Media said Wednesday its Sour Crude Index will be adopted by Saudi Aramco to set prices for oil sold in the U.S., in a move away from a formula tied closely to light, sweet crude futures traded on the New York Mercantile Exchange.
The backing of the world's biggest oil exporter gives new clout to the five-month-old benchmark, and to the Gulf Coast market where the oil tracked in the Argus index is delivered. Argus and rival Platts have argued for years without gaining much headway that growing production in the Gulf of Mexico makes the region better-suited for setting oil prices than Cushing, Okla., the delivery point for barrels underpinning the Nymex futures contract.
Aramco's shift could eventually lead to lower trading volume for the Nymex contract if their customers, such as refiners, no longer see Cushing-delivered as adequately protecting against price volatility. CME Group Inc., which owns Nymex, plans to introduce a new derivative by the end of the year to capitalize on the early success of the Argus index, said Bob Levin, the exchange operator's managing director for energy research and product development.
