U.S. crude oil production has risen substantially to approximately 10.8 million barrels per day in 2018. It is predicted that crude oil production will continue to hit record highs in the upcoming years. Additionally, the recent growth in U.S. crude oil exports has been transformative for the U.S. crude oil market.
Houston, Texas has evolved into a major export hub and has become a vital supporting market to WTI in Cushing, Oklahoma. New infrastructure has been constructed to process the growing export volumes and these changes have transformed the U.S. into the marginal supplier of oil to the world. 2018 U.S. exports of crude averaged almost two million barrels per day in 2018, up 75% from 2017.
As the United States continues to become a major factor in the crude oil space, market participants need to have the ability to hedge their exposure to adverse price moves on the value of their oil related assets.
Demonstrating continued leadership in the U.S. crude space, CME Group recently launched physically delivered, WTI Houston futures and options. These products offer access to the most robust crude infrastructure in Houston - allowing for enhanced price discovery, liquidity and risk transfer in this growing region.
The WTI Houston Crude Oil futures contract offers physical delivery to the Enterprise Houston system including the Enterprise Crude Houston terminal, Enterprise Houston Ship Channel or Genoa Junction.
Additionally, CME Platforms Inc, a subsidiary of CME Group, has developed an electronic auction platform for spot transactions. CME has partnered with Enterprise Products Partners LP for the first live U.S. crude oil export auction.
Enterprise Products Partners LP is one of the largest midstream energy companies in the world and a leading North American provider of service linking producers and consumers. Through its network of pipelines, storage and marine terminals, Enterprise Products Partners LP has the capability to aggregate more than 4 million barrels per day of various grades of crude oil.
Additionally, with a network of 19 ship docks along the Gulf Coast, Enterprise is the largest exporter of crude oil in the nation. It averaged more than 800,000 Barrels Per Day in the second quarter of 2018. The company is currently developing an offshore terminal off the coast of Texas that will allow it to fully load Very Large Crude Carrier tankers at a rate of 2 million Barrels Per Day.
The first CME auction featuring US crude oil will take place on an electronic platform in the first quarter of 2019 with delivery out of the Enterprise’s Houston Ship Channel Terminal. Approved participants will be able to partake in a competitive and anonymous crude oil auction – benchmarked against the NYMEX WTI Houston futures contract.
Available through CME One or CME Direct, the auction provides low-cost access to international markets and enhanced transparency and efficiency for U.S. crude exports. While providing a consistent and known quality of U.S. crude oil, and it is a vehicle to connect traders across the world to the most robust crude oil infrastructure network in Houston.
With the creation of the crude oil auction, CME and Enterprise team the physical and financial marketplace together to allow for easier hedging of physical cargoes.
CME Group’s multiple futures and options products allow participants to effectively and efficiently manage their risk by providing liquidity, pricing transparency and easy access to markets
The launch of the Houston Crude Oil Futures contract and Crude oil export auctions further enhance NYMEX crude oil as the global crude oil benchmark.