Platts Launches Light Houston Sweet Assessment to Reflect U.S. Crude
New open-market price reference to assist regional and global producers,
refiners and traders
HOUSTON, July 26, 2013
HOUSTON, July 26, 2013 /PRNewswire/ --Platts, a leading global energy,
petrochemicals and metals information provider and top source of benchmark
price references, announced that, starting today, it will publish a new daily
oil price assessment – Platts Light Houston Sweet – that reflects the value of
light sweet crude flowing from inland domestic production centers to Houston,
Platts Light Houston Sweet (LHS) is the latest in a series of assessments
launched by Platts in response to the significant structural shifts taking
place in the U.S. crude market as "tight oil*" exploration and development has
dramatically increased domestic production and reshaped traditional crude
flows and refinery demand patterns. According to the U.S. Energy Information
Administration, domestic U.S. crude oil production has reached 7.5 million
barrels per day (b/d) as of July 19, the highest levels since 1989.
"The development of over 1.7 million b/d of pipeline capacity to bring U.S.
crude production to Houston by 2014 has set the stage for a new spot market
and created the need for a new marker that reflects both U.S. Gulf Coast and
global crude fundamentals," said Esa Ramasamy, Platts editorial director,
strategic oil markets development. "As new pipelines and other forms of
transportation enable domestic crude to flow to the Gulf Coast rather than
being trapped inland, the U.S. market is rapidly resetting itself. The change
is already evident in the narrowing price spread between WTI and Brent, two
global benchmarks. The rise in U.S. domestic crude oil production is beginning
to be felt globally."
Houston, currently the location for several Americas refined products
benchmarks, is the largest refining center in the U.S. with 2.2 million b/d of
refining capacity. With the rebirth of U.S. crude production nearby, the Gulf
Coast port city is undergoing a massive infrastructure renaissance, evidenced
by the development of 31 million barrels of crude oil storage and the
expansion of local pipeline capacity between storage terminals and refineries
by the middle of 2014. Pipelines, including Enterprise/Enbridge's Seaway and
Magellan's Longhorn, are connecting inland production centers to the U.S. Gulf
Coast, with Houston as the main target of these shifting crude oil flows.
"Houston's superior refining capacity, storage, and waterborne loading
infrastructure positions it to become a key pricing hub in the Americas," said
Suzanne Evans, senior manager, Platts' Price Group. "The prolific Permian
Basin – the home of WTI – and the Eagle Ford shale are in Houston's backyard.
This new crude oil production, combined with movements of Domestic Light Sweet
from the Cushing, Oklahoma, hub to Houston via the Seaway Pipeline, is
creating a vibrant light, sweet spot market in Houston."
Because of Houston's position as a market center, Evans added, the new Platts
price assessment has the potential to become the benchmark for U.S. crude.
"Platts LHS price assessment will not only provide a relevant price for
regional traders and producers, but it could become a broader reference point
for the Americas because of the unprecedented convergence of supply and demand
in Houston," she said.
For a Platts map of Houston crude oil storage and distribution, click here.
The Platts LHS assessment, which is published as a flat price, takes into
account trading on both a flat price and a floating price basis. It reflects
1,000 b/d of ratable crude – for a minimum of 25,000 barrels in total –
delivered over the course of the prompt pipeline month on a Free In Pipe (FIP)
basis out of three Houston terminals: Magellan East Houston Terminal,
Enterprise Houston Crude Oil Terminal and Oil Tanking Houston Terminal.
Platts uses WTI Midland specifications at East Houston in its LHS assessment,
and may normalize Domestic Light Sweet and Eagle Ford bids, offers, and
transactions at Houston to a WTI Midland specification basis. The quality
specification basis for WTI Midland at Houston is detailed in a subscriber
note issued by Platts earlier today.
On July 1, Platts introduced a daily assessment reflecting the value of U.S.
Gulf Coast propane gas cargoes loading at major U.S. Gulf Coast export
centers. Like the LHS assessment, the propane assessment responds to the
dramatic increase in U.S. production, specifically significant growth in
propane production which has transformed the U.S. from a net importer to a net
exporter of propane.
Both the Platts LHS and propane assessments were developed using its
Market-on-Close (MOC) methodology, a highly-structured, transparent price
assessment process based on the principle that price is a function of time.
The MOC process in oil identifies bid, offer and transaction data by company
of origin and results in a time-sensitive, end-of-trading-day daily price
assessment. For more information on the methodology and quality-control
guidelines, visit the methodology and specifications page of the Platts
The assessments are published in numerous Platts publications including Platts
Global Alert, a real-time news service; Platts Market Data - Oil, a data
delivery service; and the publications Platts Crude Oil Marketwire, North
American Crude Wire, and Platts Oilgram Price Report. For more information on
crude oil, visit the Platts website at www.platts.com.
* Tight oil" refers to crude that is recovered through unconventional
techniques such as horizontal drilling and hydraulic fracturing.
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