CME Group Inc. is eyeing Louisiana Offshore Oil Port’s facility in Louisiana and Enterprise Products Partners LP’s ECHO Terminal near Houston as potential delivery points for new crude-oil futures contracts.
The group, which operates the New York Mercantile Exchange, may even consider an East Coast crude contract if Enbridge Inc. completes the reversal of its Line 9B to deliver oil to Montreal, Daniel Brusstar, director of energy research at CME, said at a media lunch in Houston.
Futures contracts are designed to allow traders to hedge risk at a certain location, so the group constantly monitors cash markets to determine where futures are needed, Gary Morsches, CME’s managing director, said at the lunch.
“It’s as much art as it is science determining where futures contracts go,” he said.
Brusstar said he hopes the group will have an announcement to make by the end of the first quarter about new quality specifications for West Texas Intermediate, one of the most widely traded crude contracts in the world. He said the changes may be adopted by the end of 2014.
As shale drilling boosts U.S. crude production, groups like the Crude Oil Quality Association have asked the CME Group to add new specifications, such as metal content and boiling points, to make sure the contract reflects the current quality of WTI in Cushing, Oklahoma.