WTI Houston crude prices gain prominence as US oil exports rise

Benchmark crude oil prices in Houston saw increased trading volume as rising U.S. crude exports from the Gulf Coast make regional prices more important to physical and futures traders, analysts and industry officials told Reuters.

Rising US crude exports, particularly WTI Midland, have dominated global markets in recent months, with record export volumes and a significant portion being sent to Europe.

Before the US allowed crude oil exports to international markets other than Canada in 2015, rising US production during the first shale revolution in the early 2010s capped the price of WTI oil, which was trading at a discount of $15-20 a barrel to Brent, the benchmark price for oil pumped into the North Sea.

Significant bottlenecks in the flow of crude oil and the fact that US crude oil was only exported to Canada meant that Brent held a large premium over the price of US oil.

But after the U.S. allowed crude oil exports in 2015, and after midstream operators seized the opportunity to build pipelines in Texas and Louisiana to export terminals on the U.S. Gulf Coast, U.S. exports increased and made WTI a more influential benchmark in oil markets.

US oil has become so influential that WTI Midland, produced in Texas, was last year included in the Datad Brent portion of the Brent benchmark as one of several grades underlying the contract.

Earlier this year, CME Group announced that trading in US crude oil futures, which are settled through Argus and trade as a spread against the global benchmark WTI Crude Oil futures, hit multiple records in April 2024.

So far in September, average daily volumes of the WTI Houston contract on the CME have more than doubled from September 2023 to a record high, CME officials told Reuters.

“The physical market for US production has already moved to the US Gulf Coast, and now the futures market is following suit,” Jeff Barbuto, global head of oil markets at the Intercontinental Exchange (ICE), told Reuters.

The growing importance of the Houston WTI contract has spared oil prices from peaks as crude inventories at the Cushing hub, the delivery and price point for WTI crude futures on the NYMEX, fell to an operational low earlier this month.

By Charles Kennedy for Oilprice.com

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