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By Joshua Schneyer and Luke Pachymuthu
NEW YORK/DUBAI, Dec. 14 Kuwait, the world's No.
4 oil exporter, will switch the basis on which it prices oil
cargoes bound for the United States to the Argus Sour Crude
Index (ASCI), following a similar move by top world exporter
Saudi Arabia, sources familiar with the plans told Reuters on
Kuwait will soon start pricing its U.S. exports against
ASCI, a basket of sour crudes produced in the U.S. Gulf of
Mexico, the sources said. They did not specify whether the
switch would take effect immediately, but said state-run oil
company Kuwait Petroleum Corporation sent a letter to U.S.
buyers, informing them of the switch.
U.S. refiners have been expecting the switch in Kuwaiti
pricing. Aramco, the Saudi state oil company, has already made
the switch to ASCI for the basis of its U.S. exports, dropping
West Texas Intermediate (WTI) prices published by Platts.
Kuwait, whose 246,000 barrels a day of exports to the
United States in September were about one-fourth of Saudi
Arabia's U.S.-bound shipments, depends heavily on Saudi prices
to determine the value of its own exports.
It was "inevitable for (Kuwait) to make the switch," one
veteran crude trader with an oil major said, since Kuwait
already prices its crude sales to the United States at a
differential to Saudi barrels.
"But more importantly they will do this because the Argus
index is just more reflective of the kind of crudes they are
Sour crudes, including grades like Mars MRS- included in
the Argus Index, are growing in popularity among U.S. refiners,
especially in the key refining region of the U.S. Gulf Coast.
WTI, whose main delivery point is Cushing, Oklahoma, is
light and sweet, while Saudi Arabia and other Arabian Gulf
producers export mostly medium-sour crudes into the United
Prior to the switch, Saudi Arabia relied for 15 years on
U.S. benchmark WTI crude as the basis of its U.S. export
pricing, but WTI for prompt delivery has been trading at
unusual discounts to other crude contracts this year.
A glut of WTI at Cushing has depressed prices and led some
to question whether WTI remains a reliable benchmark.
The growing popularity of sour crudes, which are typically
harder to refine but cheaper, has helped give rise to several
new sour crude contracts that began trading this month and last
on exchanges like NYMEX and ICE.
(Editing by Christian Wiessner)