Kuwait
could switch the pricing of its crude sold to
U.S.
customers to the Argus Sour Crude Index, or ASCI, from Platt's West Texas
Intermediate, or WTI, following in the footsteps of
Saudi Arabia
,
Kuwaiti oil officials said.
"
Kuwait
could look at it definitely because we don't think the pricing peg
today to the WTI is really representative of the market," a senior
Kuwait
oil official told Zawya Dow Jones.
Saudi Arabia
, the world's biggest oil exporter, has dropped the longtime WTI
benchmark, which is based on a formula tied to light, sweet crude futures
traded on the New York Mercantile Exchange, or Nymex. State-owned Saudi Arabian
Oil Co. will implement the new policy for January oil sales to the U.S.
London-based Argus Media launched the ASCI in May this year to reflect the U.S.
Gulf coast medium sour crude, where growing production from the region has
given a boost to alternatives to the WTI assessment.
Saudi exports to the
U.S.
are closer to medium sour crude produced in the
Gulf of Mexico
, which has a
lower-quality oil with higher levels of sulfur than the sweet, light oil.
"
Kuwait
is usually in line with
Saudi Arabia
activity," another Kuwaiti official said. "The switch is in our favor
because it relatively reduces volatility in the WTI and it is more transparent
and reflects what is happening in the market."
STORAGE CRUNCH
Argus
and rival Platts, a unit of McGraw-Hill Cos (MHP), have argued for years that
growing production in the
Gulf of Mexico
makes
the region better-suited for setting oil prices than
Cushing
,
Oklahoma
, the
inland delivery point for barrels underpinning the Nymex futures contract.
"It is reasonable to think that other producers in the Middle East or
Latin America would have a look at the Argus Sour Crude Index as a solution to
some of the problems they have in pricing sour crude," said Jason Feer,
senior vice-president and general manager for Asia Pacific at Argus Media.
He declined to name any specific countries.
Saudi Arabia
's
shift could encourage other sour crude oil exporters to the
U.S.
such
as
Venezuela
and
Iraq
to
follow suit and adopt the new assessment.
"WTI has been the benchmark but is suffering from issues related to the
specifics of the inland characteristics and we have seen very wide spreads in
WTI," said Olivier Jacob, managing director of Switzerland-based research
group Petromatrix.
"So it makes sense for the physical suppliers such as
Saudi
Arabia
,
Kuwait
,
Iraq
, etc
to try and find a more stable alternative benchmark," Jacob added.
WTI pricing often reflects storage and pipeline capacity problems at
Cushing
,
Oklahoma
,
while oil from the
Gulf of Mexico
has several potential
delivery points and more pipeline routes out of the region, making a storage
crunch less likely.
Venezuela
's oil
minister Rafael Ramirez has already applauded
Saudi
Arabia
's decision to move away from
WTI and said his country may do something similar.
The WTI benchmark has suffered from fluctuations due to the rampant speculation
on crude futures trading on the Nymex, the world's main platform for oil
trading.
Saudi Arabia
exported over 1.5 million barrels a day of crude oil to the
U.S.
in
2008, second only to
Canada
,
according to figures from the U.S. Energy Information Administration., or EIA.
Kuwait
, one
of the smaller oil exporters to the
U.S.
, sent
206,000 barrels a day of oil to the market in 2008, EIA figures show.