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pinkmandy
10-28-2009, 07:52 PM
http://www.ft.com/cms/s/0/8cda145a-c3fe-11de-8de6-00144feab49a.html?nclick_check=1


Saudis drop WTI oil contract

By Javier Blas in London

Published: October 28 2009 20:27 | Last updated: October 28 2009 20:27

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

Strict copyright so I didn't post it all.

Just how bad is this? As bad it sounds??? :eek:

dannno
10-28-2009, 07:59 PM
Did we drill ANWR or something?

Dieseler
10-28-2009, 08:03 PM
I knew we were bombing the wrong damn country.

pinkmandy
10-28-2009, 08:48 PM
What will this do to futures contracts?

Original_Intent
10-28-2009, 08:58 PM
Well well well maybe the "End of October" doomsayers weren't completely wrong.
MSN Money is also saying tomorrow could be a "dramatic" day on Wall St tomorrow if the GDP number miss the lowered expectation of 2.7% annualized growth. So tomorrow could just be all kinds of fun it sounds like.

Rael
10-28-2009, 10:25 PM
I don't quite understand what this means...

sevin
10-28-2009, 10:45 PM
I don't quite understand what this means...

me neither

Live_Free_Or_Die
10-29-2009, 04:28 AM
nt

Zippyjuan
10-29-2009, 06:17 PM
That link didn't take me to the article. Maybe this one? http://www.ft.com/cms/s/0/2034dd70-c42c-11de-8de6-00144feab49a.html

From what I can make of it the West Texas Intermediate oil index is the price of a very high grade of crude oil and does not necessarily reflect the price of more standard crude oil and the price gap between the two- which used to be a dollar or two a barrel- has gotten to over $12 difference so they are moving to an index which more accurately reflects the grade of oil produced in Saudi Arabia- the London based

Sources: http://tonto.eia.doe.gov/ask/crude_types1.html

West Texas Intermediate
West Texas Intermediate (WTI) crude oil is of very high quality and is excellent for refining a larger portion of gasoline. Its API gravity is 39.6 degrees (making it a “light” crude oil), and it contains only about 0.24 percent of sulfur (making a “sweet” crude oil). This combination of characteristics, combined with its location, makes it an ideal crude oil to be refined in the United States, the largest gasoline consuming country in the world. Most WTI crude oil gets refined in the Midwest region of the country, with some more refined within the Gulf Coast region. Although the production of WTI crude oil is on the decline, it still is the major benchmark of crude oil in the Americas. WTI is generally priced at about a $5 to $6 per-barrel premium to the OPEC Basket price and about $1 to $2 per-barrel premium to Brent, although on a daily basis the pricing relationships between these can vary greatly.




OPEC Basket Price
For a discussion of crude oil pricing in general, and of the OPEC Basket price in particular, see EIA's OPEC Revenues Fact Sheet. OPEC collects pricing data on a "basket" of seven crude oils, including: Algeria's Saharan Blend, Indonesia's Minas, Nigeria's Bonny Light, Saudi Arabia's Arab Light, Dubai's Fateh, Venezuela's Tia Juana Light, and Mexico's Isthmus (a non-OPEC crude oil). OPEC uses the price of this basket to monitor world oil market conditions. As mentioned above, because WTI crude oil is a very light, sweet (low sulfur content) crude, it is generally more expensive than the OPEC basket, which is an average of light sweet crude oils such as Algeria's Saharan Blend and heavier sour crude oils (with high sulfur content) such as Dubai's Fateh. Brent is also lighter, sweeter, and more expensive than the OPEC basket, although less so than WTI.



From the original link:

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the benchmark became separated from the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America's pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 - a record gap. This dislocation in the market continued well into the summer.

From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil pricing company.

The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon and Southern Green Canyon.

Argus said the change in policy reflected the "increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply".


Does not sound like it has anything to do with the dollar but more with whether the index accurately reflects the worldwide price of oil.