RABIGH, Saudi Arabia, Nov 8 (Reuters) - Saudi Aramco said on Sunday its decision to 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 of West Texas Intermediate (WTI).
“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.”
Saudi Arabia’s exports to the United States are mostly medium-sour crudes.
Aramco, the state oil company of the world's top oil exporter, had previously used West Texas Intermediate prices published by Platts, a unit of McGraw Hill MHP.N, as its price market.
These prices are closely linked with the U.S. light sweet futures contracts CLc1 traded on NYMEX -- the world's main forum for often volatile and speculative oil futures trading.
The switch would offer a viable solution for both Aramco and its customers, Falih said.
“The Argus index was a solution ... we believe it is good for our customers, it’s good for us, it’s transparent and will solve the problems that we will see in the future,” he said.
U.S. sour crude still uses WTI as a price reference. Argus says that its sour index “responds quickly to global market dynamics” if the U.S. marker becomes dislocated from world crude prices. (Reporting by Luke Pachymuthu, editing by Maureen Bavdek)
Our Standards: The Thomson Reuters Trust Principles.