Platts launches consultation on new WTI pricing for US crude

In response to market feedback, S&P Global Platts is launching a formal consultation on how best to assess the value of WTI crude oil in the US in view of recent market developments.

Platts invites feedback from all market participants and will hold a public webinar on the topic on May 19, 2020.

On April 20, May WTI futures on the NYMEX fell into unprecedented negative territory during the final hour of trading, settling at minus $37.63/barrel.

While many fundamental and technical factors may have contributed to the rapid decline in prices, the event highlighted a disconnect between the futures price at Cushing, Oklahoma, and crude pricing for physical barrels in the wider US market.

Platts is considering feedback that crude market participants require a new pricing mechanism that does not reflect the potential for disconnection from core physical markets.

Platts believes this may require pricing that is not inextricably linked to WTI at Cushing.

In addition to Cushing, Platts publishes the following WTI price assessments at Midland, MEH and FOB US Gulf Coast:

WTI (Midland) PCACJ00

WTI Midland (2nd month) AAYZA00

WTI MEH AAYRG00

WTI MEH (2nd month) AAXXE00

WTI FOB US Gulf Coast AAYBA00

Platts invites feedback on whether it should either amend any of these assessments or launch new values to meet market demand for a new pricing mechanism.

In addition, Platts invites feedback on how crude trade on a postings-plus basis could be better reflected in its P-Plus WTI assessment.

Alongside these physical assessments, Platts seeks feedback on launching a new Calendar Month Average assessment of core WTI values at Houston.

Platts is also considering feedback that crude produced under federal leases cannot legally be sold at negative values.

This may mean that Platts would not publish a negative physical value for these assessments.

In its existing assessment methodology, Platts already looks to gather market data showing the value of crude on both a flat price and a floating price basis, where necessary normalizing these to ensure that the published assessments reflect the tradeable value of the crude at the market close.

On April 20, this approach ensured that Platts Gulf Coast crude assessments did not follow Cushing WTI prices into negative territory.

Platts invites feedback on this approach to resolving the potential disconnect between financial futures trade at Cushing and the value of physical crude in other locations.

Platts only reflects physical market information in its crude assessments, including published bids, offers and trades from a wide variety of physical market participants.

Platts is seeking feedback from interested parties on all of these issues until May 29, 2020.

Please send all feedback and comments to americas_crude@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing.

Platts will consider all comments received, and will make comments not marked as confidential available upon request.