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Growing U.S. Oil Exports Make WTI Nearly 24-Hour Benchmark

The crude oil futures market has felt the rise of U.S. crude oil exports with growing volumes of West Texas Intermediate futures and options traded in Asian and European hours, making the WTI contract an almost 24-hour benchmark, Owain Johnson, managing director for energy research and development at exchange operator CME Group, said on Thursday.

South Korea and China are the fastest-growing trading communities on WTI, Johnson said at the Argus Global Crude 2018 conference in Geneva.

“Ten to 20 percent of our daily volumes are trading in European and Asian hours... names that we never came across are now regulars,” Johnson said, as quoted by Reuters.

“You’re getting a 23-hour benchmark,” he added.

The CME trading shuts down for an hour for maintenance every day.

The exchange operator has been adding new U.S. oil contracts because it has seen a lot of interest in the spreads to WTI, Johnson said, noting that there is a lot of liquidity for the new derivatives trade for new U.S. grades.

“It’s trading very aggressively, mainly through brokers... and they’re popular with Asian and European importers,” Johnson added.

Rising U.S. oil production and exports out of the U.S. Gulf Coast have also prompted exchange operators to launch new contracts priced off Houston.

CME Group said last month that it would be offering a new WTI Houston Crude Oil futures contract beginning this quarter, with three physical delivery locations on the Enterprise Houston system.

“Houston’s importance as a trading and export hub for physical crude oil from Cushing and the Permian Basin continues to evolve due to the shale oil revolution and repeal of the crude oil export ban,” Peter Keavey, CME Group Global Head of Energy, said in September.

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In July, CME’s rival Intercontinental Exchange said that it planned to launch a crude oil futures contract of physically delivered Permian WTI, deliverable in Houston, as the city has become the pricing center for U.S. oil amid growing production and exports.

By Tsvetana Paraskova for Oilprice.com

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