CME/NYMEX

Cushing. This small town in central Oklahoma is the center of the U.S. crude oil universe, with prices at the Cushing hub serving as the reference price for all of the crude produced in the U.S. — and given the role that U.S. oil has assumed on the global stage, one of the most important determinants of global crude oil pricing. Considering the hub’s significance, it’s frequently surprising to industry veterans just how misunderstood Cushing can be. Like, for example, how SHOCKED the world was when Cushing prices dropped below zero back in April. Cushing traders had seen that coming for weeks — the only surprise to them was how far the price plunged that crazy Monday morning. It’s easy to see how something as enigmatic and complex as Cushing might be misunderstood — or underestimated — if you’re not familiar with its history, its inner workings, and its many crucial roles in both the physical and financial crude oil markets. It’s also tempting to think you can get by with only a passing knowledge of Cushing and how it operates. Au contraire! Cushing really matters, and market participants ignore it at their peril. The good news is that there’s finally a combo encyclopedia and user’s manual for “The Pipeline Crossroads of the World.” Today, we examine the hub’s significance to producers, refiners, midstreamers, marketers, and traders, and discuss highlights from RBN’s new Cushing Playbook.

Cushing. This small town in central Oklahoma is the center of the U.S. crude oil universe, with prices at the Cushing hub serving as the reference price for all of the crude produced in the U.S. — and given the role that U.S. oil has assumed on the global stage, one of the most important determinants of global crude oil pricing. Considering the hub’s significance, it’s frequently surprising to industry veterans just how misunderstood Cushing can be. Like, for example, how SHOCKED the world was when Cushing prices dropped below zero back in April. Cushing traders had seen that coming for weeks — the only surprise to them was how far the price plunged that crazy Monday morning. It’s easy to see how something as enigmatic and complex as Cushing might be misunderstood — or underestimated — if you’re not familiar with its history, its inner workings, and its many crucial roles in both the physical and financial crude oil markets. It’s also tempting to think you can get by with only a passing knowledge of Cushing and how it operates. Au contraire! Cushing really matters, and market participants ignore it at their peril. The good news is that there’s finally a combo encyclopedia and user’s manual for “The Pipeline Crossroads of the World.” Today, we examine the hub’s significance to producers, refiners, midstreamers, marketers, and traders, and discuss highlights from RBN’s new Cushing Playbook.

In January 2016 the ICE futures Exchange changed the expiration calendar for its flagship Brent crude contract. The March 2016 contract expired on January 29, 2016 under new calendar rules that stipulate expiration one month and one day prior to delivery. This was done belatedly to reflect a change in the assessment of the physical Brent market that was implemented back in January 2012. On paper the change is just an overdue action by ICE to properly align the timing calendar for their popular futures contract with the underlying physical market. But in practice - as we suggest in today’s blog, the change has significant impacts on the calculation and analysis of the commonly utilized spread between ICE Brent (the international benchmark crude) and the U.S. equivalent West Texas Intermediate (WTI) crude futures contract traded on the CME/NYMEX.

Next week (January 2016 - according to press reports) Enterprise Products Partners will load the first cargo of U.S. crude oil to be exported without regard to the regulations that restricted such movements to most countries except in certain circumstances for the past forty years. It looks like the lifting of crude oil export restrictions came too late to have much impact on U.S. production or prices in an era of free falling prices. Today we look at the impact of the change on the crude price spread between U.S. benchmark West Texas Intermediate (WTI) and international counterpart Brent.

The New York market for residential and commercial heating oil is traditionally tight in the winter months when demand exceeds local production and supplies are supplemented from storage and inflows/imports from outside the region. Coming into winter this year inventory levels were above normal for the time of year and market prices are in contango (a condition where future prices are higher than today) – encouraging further storage. Today we explain how the result is an extension of traditional seasonal storage trade opportunities and a shortage of available inventory capacity.

The CME/NYMEX Henry Hub natural gas futures contract turns 25 years old this year. The contract is now the third largest physical commodity futures market in the world. The price of virtually every Btu of gas sold in North America is linked in some way to the underlying physical hub at Henry. But over the past five years shale gas has revolutionized North American supply and changed the shape of delivery patterns. These trends have altered the flow of physical gas through Henry Hub and could jeapordize the success of the futures contract. Today we look at  why Henry Hub has been so successful.