The Saudis announced they are no longer using the WTI benchmark for pricing of exports.
http://seekingalpha.com/article/170366-saudis-drop-wti-oil-contract-but-why
Implications:
+ The era of the sweet crudes is long over. Lower grade crudes are far more common and most refineries are set up for them. The sweets will still carry a premium but they aren't the logical choice for an international benchmark.
+ An inland domestic contract like WTI is basically useless from an international trade standpoint. WTI prices reflect US domestic factors and temporary inventory fluctuations in storage tanks in Oklahoma. That is not helpful for a contract that is supposed to be a global benchmark.
That WTI has lasted as long as it has is a testament to the power of inertia, and NYMEX's efforts to keep liquidity up, but I got to think this is the beginning of the end of its high profile role.
Yay?
:thumbsup:
Actually it makes sense to me.
We need a new index for oil. Something that reflects the true nature of the market it measures. We could call it:
NEMO - Nationalized Exports of Monopolists and Oppressors index.
or
CRAP - Communists', Racketeers' and Authoritarians' Petroleum index.
Let me think on this for a while.
The purpose of the index is to make market work. The crude quality that sets the prices usually is the most common found. As Joan says, what this really means is that the availability of crude of the quality of WTI is declining. Other standards will be used in future to price oil. Brent Crude is still the standard for North Sea oil. This is basically answering the question "how much does a liter of milk cost" with the price of skimmed milk rather than whole milk now that almost everybody drinks skimmed milk.
:x
1 or 2% sure, but not fully skimmed.