Argus launches new benchmark for growing US crude oil hub

26 June 2020

Global commodity pricing agency Argus has launched a new outright daily crude price assessment — Argus AGS (American GulfCoast Select) — to reflect the growing importance of the US Gulf coast as a major export hub.

US crude markets have been transformed over the past five years, creating new opportunities, challenges and the need for more relevant pricing tools. The new Argus AGS price assessment is designed to meet that need, and to reflect the growth of the US Gulf coast, with its network of refineries, storage facilities and export terminals, as a nexus where domestic US and international waterborne markets converge.

The huge growth in US crude production over the past decade, coupled with the federal government’s removal of crude export restrictions in 2015, has driven the emergence of the US Gulf coast as a domestic and international trading centre for high-quality crude from the Permian basin. The new Argus AGS price reflects Midland-quality oil.

The US’ long-time futures-based crude benchmark, Nymex light sweet crude is more closely linked to inland markets as it is delivered on expiry into the landlocked Cushing, Oklahoma, storage and trading hub. This means it is subject to local fundamentals, including pipeline and storage capacity limitations. As a result, other benchmarks have developed that provide a bridge between Cushing and the US Gulf coast. These include the Argus WTI Houston assessment, which is used by many companies around the world to price their sales and purchases of crude into and from the US.

The new Argus AGS price assessment index has been developed in close consultation with market participants, including the American GulfCoast Select Best Practices Task Force Association, and takes into account both pipeline and cargo trades — the two alternative markets at Houston. From today, it will be published daily in the Argus Crude and Argus Americas Crude reports, both as an outright price and as a differential against Nymex light sweet crude.

Initially, Argus AGS will be based on activity at Houston, the key market hub, but will later expand to cover other robust, liquid trading locations such as Corpus Christi, Nederland, Clovelly and St James. Argus Media chairman and chief executive Adrian Binks said: “We have been hearing tremendous support for an index that represents the price of WTI at the Gulf coast, independently of Cushing. We are incredibly excited to launch the Argus AGS marker, which represents an outright price on the US Gulf coast.”