The suggestion of replacing Cushing as the oil hub setting the price of U.S. crude has resurfaced again.
The Wall Street Journal raised the question this week in a story that announced Houston is ready to get its own oil futures. Intercontinental Exchange Inc. ICE, is planning a new crude futures contract with physical delivery in Houston.
The company said the contract will provide traders with direct access to Houston prices and the exchange plans to launch the move this quarter.
“Houston’s become the main trading hub,” said Jeff Barbuto, vice president of oil markets at ICE. “It’s a better representation of the economics of where U.S. crude production meets the water to be exported.”
The benchmark for U.S. oil prices has been set for decades at the Cushing hub, largely because of the accessibility through pipelines and the massive storage space at the tank farm. But as we’ve reported previously, analysts believe the pricing power is shifting from Oklahoma to the Gulf Coast where oil is loaded and sent overseas.
However, those who trade Houston prices still use the futures that track prices in Cushing.