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Saudi Arabia yesterday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.
The decision by the world's biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world's most heavily traded oil futures contract. It is the main contract traded on Nymex.
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.
Saudis to drop WTI as price benchmark for U.S. crude
Quote:
The WTI price measure has dominated North American oil trading – and conversation – for decades. It is based on oil sales in Cushing, Okla., and is one of two globally watched markers of crude. The other is Brent, which is based on sales in the North Sea.
There are several important technical reasons for the move by Saudi Arabia, the world's biggest crude exporter. However, the shift also speaks to the slow, but dramatic, reshaping of the global energy landscape, as emerging countries take an increasingly prominent role in the oil trade.
Quote:
“What it [the Saudi move] really speaks to is the demand shift in oil away from the U.S. and to other places in the world. That's what's really driving the bus,” said Jeff Rubin, the former CIBC chief economist and author of Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization.
“North American oil demand has peaked,” he said. “What this really says is that whereas WTI in the past had been a premium price, now WTI is going to be a discount price.”
Another nail in the coffin. We can't see "the decline" because we're living it.
Separately, each little piece may not mean much. But when you put all those little pieces together it can tell a story.
I've been following the global mutterings about the USD. China seems to be the driving force and has gotten some backers. Most recently France has publically commented.
Now Turkey is deciding to drop the dollar for trading with China, Russia and Iran.
Turkey plans to dump dollar in trade with Iran - Forbes.com (http://www.forbes.com/feeds/afx/2009/10/30/afx7067545.html - broken link)
All countries should have abandoned the dollar years ago.
There is nothing backing the value of the dollar - even at it's pitifully low current value.
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Saudis to drop WTI as price benchmark for U.S. crude
