Simplifying the complex: how Platts AGS brings fungibility to the US crude export market

In the wake of a historic dive into negative figures on April 20, the oil industry called for an alternative to pricing at the hub of Cushing, Oklahoma. S&P Global Platts responded by putting to work its expertise in cargo markets to design a methodology that would simultaneously provide clarity into what is being valued and a broad, regional representation of price. Platts AGS, the US’ new waterborne crude benchmark, clearly demonstrates the value of a defined grade within a specific trading framework, bringing structure to a regional market previously characterized by one-off deals. The tension between liquidity and precision is an important consideration in the development of a new US crude benchmark. Higher transaction volume does not improve the usefulness of an assessment if it undermines clarity and precision. On the other hand, an overly specific assessment may not reflect a broad enough segment of the market to provide a trustworthy representation of price. To take an extreme example, consider a US Gulf Coast crude assessment that calculates a volume-weighted average based on information from a basket of pipeline and cargo trading locations in the Gulf Coast, normalized based on historical spreads to a single terminal. This assessment could… continue reading

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