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Platts Proposes Launch of Major New Crude Oil Assessment for U.S. Market

Posted on: Tuesday, 3 March 2009, 13:48 CST

New Sour Marker Would Reflect U.S. Gulf Coast, and Act as Alternative Reference to Troubled Sweet Marker

HOUSTON, March 3 /PRNewswire/ -- Platts, a leading global energy information provider, today proposed the launch of a major new crude oil price assessment to capture the value of sour crude oil in the U.S. Gulf of Mexico, the main hub for refining, production, importing and handling of crude oil in the United States. Sour crude accounts for close to two-thirds of the oil that goes into U.S. refineries for the production of various oil products.

Platts' new assessment, which would be named Americas Sour Marker (ASM), would provide the industry with an alternative price reference to West Texas Intermediate (WTI), a sweet or low-sulfur crude oil benchmark, which has been the target of much market scrutiny. The proposed ASM is intended to address the price reference needs of market participants concerned over recurring deviations in price between the major WTI futures benchmark relative to other key global crude oil benchmarks, as well as the growing need for a U.S. sour benchmark.

"There is growing market consensus that WTI, priced at Cushing, Oklahoma and usually viewed as a global reference price, is in fact functioning more as a local, land-locked crude with an increasingly tenuous relationship to the larger U.S. and international markets," said Jorge Montepeque, Global Director of Market Reporting for Platts.

"For some time, there has been growing recognition that the U.S. is in need of a strong benchmark to reflect physical market economics in the primary refining and production areas of the Gulf Coast," he added. "We believe that need has become more urgent and that the Americas Sour Marker will provide a valuable representation of market value for crude oil in the Americas."

The ASM assessment would reflect the most competitive value of four U.S. Gulf Coast pipeline crudes: Mars, Poseidon, Southern Green Canyon, and Thunder Horse. Platts is proposing to launch the new assessment on March 16, 2009, and is currently accepting industry comments on its proposal.

The underlying methodology for the ASM would follow the Platts Brent-Forties-Oseberg-Ekofisk (BFOE) assessment model used in the North Sea, with the ASM assessment reflecting the most competitively-priced grade of the four sour crudes. Currently, Platts already separately assesses the value of all four Gulf Coast crudes. The proposed ASM assessment would be published concurrently with Platts' existing slate of U.S. sweet and sour crude assessments. It would not replace any existing U.S. crude assessments.

To access a discussion paper on the Americas Sour Marker proposal, please follow this link:

http://www.platts.com/Oil/Resources/Market%20Issues/wtipricing.pdf?S=n

To access a Question & Answer document on the Americas Sour Marker proposal, please follow this link:

http://www.platts.com/Oil/Resources/Methodology%20&%20Specifications/asmqa.pdf?S=n

For more detailed information on Platts' global crude methodology, please follow this link:

http://www.platts.com/elqNow/elqRedir.htm?ref=../Oil/Resources/Methodology%20%26%20Specifications/crudeoilspecs.pdf?S=n

Fast Facts:

• Platts proposes to launch a physical market price assessment reflecting the value of high-sulfur, sour crude oil in the US Gulf of Mexico
• Sour crude oil accounts for close to two-thirds of the oil that goes into US refineries for the production of various oil prices
  • The US Gulf Coast is the main hub for refining, production, importing and handling of crude oil in the United States
• Generally, the global known supply of sour crude oil is greater than the supply of sweet or other crudes
• Besides offering the marketplace a sour crude oil price reference, the proposed Americas Sour Marker (ASM) provides an additional or alternative price marker to the low-sulfur light sweet crude oil benchmarks
  • Platts would publish the proposed sour crude marker as an addition to its existing crude oil assessments and benchmarks
• Physical market participants have expressed frustration with the light sweet West Texas Intermediate crude benchmark over many months and its disconnectedness from the physical market economics of the primary refining and production areas of the Gulf Coast and other global benchmarks. Platts, with its proposed Americas Sour Marker (ASM), seeks to provide a solution

About Platts: Platts, a division of The McGraw-Hill Companies (NYSE: MHP), is a leading global provider of energy and commodities information. With a century of business experience, Platts serves customers across more than 150 countries. An independent provider, Platts serves the oil, natural gas, electricity, emissions, nuclear power, coal, petrochemical, shipping, and metals markets from 17 offices worldwide. Platts' real-time news, pricing, analytical services and conferences help markets operate with transparency and efficiency. Traders, risk managers, analysts, and industry leaders depend upon Platts to help them make better trading and investment decisions. Additional information is available at http://www.platts.com.

About The McGraw-Hill Companies:

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2008 were $6.4 billion. Additional information is available at www.mcgraw-hill.com.

SOURCE Platts

Source: PR Newswire

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