Oct. 30 (Bloomberg) -- CME Group Inc., the world’s largest futures exchange, will offer trading in Argus Sour Crude Index futures after Saudi Arabia’s state-owned oil producer said it will abandon the company’s main crude contract amid viability concerns.

Saudi Aramco said Oct. 28 it will start using an index of sour crudes next year to price oil for sale to U.S. customers in place of the West Texas Intermediate benchmark contract offered by CME’s New York Mercantile Exchange. In response, CME will offer cash-settled swap futures on the index beginning Nov. 23, according to a statement today.

“This week, Saudi Arabia announced that they will begin using the ASCI to price their substantial oil exports,” CME Executive Chairman Terrence Duffy said in the statement. “This further strengthens the benchmark status of our WTI contract as ASCI components are priced as differentials to the WTI settlement price.”

Aramco will use the Argus Sour Crude Index published by Argus Media Ltd. for its January pricing, according to an Argus statement Oct. 28. December prices for Extra Light, Arab Light, Arab Medium and Arab Heavy crudes are due out next week, with the January prices scheduled for early December.

Prices for West Texas Intermediate were skewed in relation to other domestic and international grades in April 2007 amid a lack of storage at Cushing, Oklahoma, where the crude is delivered. Cushing supplies fell 52 percent within seven months, only to jump again to a record in February 2009.

“This has been something under discussion between the Saudis and their customers for some period of time, at least as long ago as 2007, when WTI first appeared to be a broken benchmark,” Edward Morse, head of economic research at LCM Commodities LLC in New York, said in an interview this week.

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.

Last Updated: October 30, 2009 12:10 EDT