Saudi Arabia yesterday decided to drop the West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a blow to the New York Mercantile Exchange. The decision by the biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the most heavily traded oil futures contract.
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 contract against other benchmarks, throwing the oil market into disarray.
In January, WTI, which usually trades at a premium of $1-$2 (U.S.) a barrel to Brent, fell sharply, leaving it at a discount of almost $12 - a record gap. (more)
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