Midland WTI AGC Futures contract to start trading

After months of development, Intercontinental Exchange Inc. Its ICE Midland WTI American Gulf Coast futures contract as of January 24th.

This new contract was launched more than three years after ICE debuted futures at Permian West Texas Intermediate that delivered oil to Magellan Midstream’s East Houston terminal, and now includes an option for delivery to Enterprise Product Partners’ Enterprise Crude Houston Terminal. The first contract month to be delivered to both terminals will be the March 2022 contract.

While discussing the new contract, Jeff Barbuto, global head of oil markets for ICE, told the Reporter-Telegram last summer that deliveries to both terminals “mean that the contract will be supported by approximately 4.5 million barrels per day of supply capacity for Midland WTI quality crude directly. From the Permian River to Houston.”

He added that the contract would also provide access to approximately 60 million barrels of storage capacity at both the Magellan and Enterprise terminals, access to water across 14 ship berths in Houston and “Houston’s extensive distribution systems for Magellan and Enterprise; all united around a common specification and quality.” This includes another 90 million barrels of storage capacity in Magellan and Enterprises distribution systems.

Rick Rainey, Vice President of Public Relations at Enterprise, referred a Telegram reporter to comments made by Brent Seacrest, Executive Vice President and Commercial Director of General Partner of the company.

In his comments on the contract launch, Secrest commented: “Based on market feedback received during the development of contract rules and specifications, it has become clear that a solution is needed to help ensure that buyers are able to receive crude oil at the terminal of their choice. We are pleased to work with Magellan. To provide this flexibility at no cost to the Midland WTI AGC barrels, and to go one step further in standardizing public transportation for WTI that meet HOU quality specifications in support of this contract.”

Seacrest stated last summer, during contract development, “As the market center for Permian Basin production, Houston represents the most logical choice for a new future contract. Between Magellan and Enterprise, we provide access to nearly all of the Houston area’s export capacity, redundant connectivity to all area refineries, a strong storage site on the Gulf Coast, and interfaces to all relevant supply lines, including those owned by third parties.”

Rainey commented that “the Permian Basin has been the focal point of local drilling activity and there is a need” in our view to move this oil to the Houston area” and give producers options on how this oil will move from the Permian Basin to the Gulf Shore.

Under the terms of the forward contract, the seller has the option of delivery to two Magellan or Enterprise stations, and buyers have the ability to indicate their preferred station for pick-up. During the first year, Magellan and Enterprise agreed to move Midland WTI barrels between stations free of charge if not delivered to the buyer’s preferred station, and at 10 cents per barrel for all other WTI transmissions that meet Houston quality specifications.

“This contract was developed by working with industry participants every step of the way and represents a significant milestone in the development of the US Gulf Coast as a reference site for US crude pricing,” Barbuto said in a statement.

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