The Rise of Gulf Coast Price Benchmarks: How Oil Exports Are Shifting the Market
As the prominence of Gulf Coast price benchmarks continues to rise, the significance of the Cushing, Oklahoma storage hub is eroding. U.S. WTI Midland crude oil transactions have overshadowed Cushing’s role as a storage and pricing hub, with trading volumes on Houston contracts seeing a boost.
Since the U.S. lifted its ban on crude exports in 2015, the Intercontinental Exchange and CME Group launched contracts to trade and deliver crude from Midland, Texas to terminals around Houston. This shift has led to increased liquidity in these contracts, creating opportunities for hedging and arbitrage trades.
With shale oil output from the Permian basin surging and much of that oil heading to storage closer to Gulf Coast export ports, Cushing has seen a decrease in deliveries. Inventories at the Gulf Coast have increased, while Cushing storage levels have dropped significantly.
The flagship price benchmark along the Gulf Coast is WTI at East Houston, representing WTI arriving by pipeline and traded at the Magellan’s East Houston terminal. As U.S. exports continue to grow, the pricing dynamics are shifting away from Cushing towards the Gulf Coast.
Overall, this shift in the market dynamics highlights the growing importance of the Gulf Coast as a key player in the oil market. Investors and traders should pay attention to these changes and consider how it may impact their investment strategies moving forward.