Intercontinental Exchange Inc. · NYSE:ICE
Intercontinental Exchange — COQA – Corpus Christi (March 2024)
22 slides from Intercontinental Exchange's conference presentation, Mar 7, 2024
Slide 1: ICE Midland WTI (HOU) Futures
ICE Midland WTI (HOU) Futures Mike Wittner Global Head of Oil Market Research, ICE COQA – Corpus Christi March 7, 2024 1
Slide 2: ICE Midland WTI (HOU) Futures: physically deliverable crude futures for the USGC
ICE Midland WTI (HOU) Futures: physically deliverable crude futures for the USGC 2
Slide 3: ICE Midland WTI (HOU) Futures: Introduction
ICE Midland WTI (HOU) Futures: Introduction ▪ HOU is a physically deliverable futures contract for Midland-origin / Midland-quality crude priced in Houston, on the US Gulf Coast. ▪ Houston has evolved from MEH to both MEH and ECHO. ONEOK and Enterprise combined crude infrastructure includes substant
Slide 4: Today's Topics
ICE Midland WTI (HOU) Futures: Today’s Topics ▪ Today’s topics: ▪ USGC fundamentals ▪ Price risk management ▪ Supply risk management ▪ HOU trading activity ▪ Recent changes to the HOU crude quality specification ▪ Addition of Midland to the Brent complex 4
Slide 5: Midland WTI: driving growth in US crude production and exports
Midland WTI: driving growth in US crude production and exports Flows of Midland to Europe have increased since the Russia-Ukraine war Midland WTI Exports by Destination 3,500 3,000 2,500 2,000 kb/d 1,500 1,000 500 - Jan-22 Jul-22 Mar-22 Jun-22 Jan-23 Mar-23 Jun-23 Jul-23 Jan-24 Feb-22 Nov-22 Dec-22
Slide 6: The US market has evolved beyond Cushing
The US market has evolved beyond Cushing. Most Permian Basin crude flows directly to the USGC. Source: S&P Global Commodity Insights – North American Crude Oil Markets Short-term Outlook, March 2024. Data as of Jan. 17, 2024. ▪ The US market has evolved beyond Cushing. Crude gets produced in the Per
Slide 7: Price risk management: Midland WTI exports price off Brent or Dubai
Price risk management: Midland WTI exports price off Brent or Dubai. ICE Midland WTI (HOU) vs. ICE Brent ($/bbl) ICE Midland WTI (HOU) vs. ICE (Platts) Dubai ($/bbl) 2 12 0 8 -2 4 -4 0 -6 -4 -8 -8 -10 -12 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Jan-22 Apr-22 Jul-22 Oct-22 Jan-
Slide 8: Key USGC crude price differentials drive exports & hedging
Key USGC crude price differentials drive exports & hedging Traders are exposed to Midland WTI where it meets the global waterborne market on the USGC. For US crude exports to Europe, the key is Midland WTI priced at Houston vs. Brent -- not WTI Cushing vs. Brent. US Gulf Coast Crude Price Differenti
Slide 9: Physical supply risks can be managed with guaranteed physical delivery of on-spec Midland WTI crude
Physical supply risks can be managed with guaranteed physical delivery of on-spec Midland WTI crude ▪ US physical market participants experience occasional problems with Midland crude supply. ▪ Exporters can receive off spec Midland WTI at USGC terminals (as reported in the trade press) ▪ Refiners c
Slide 10: HOU trading activity (ADV/Open Interest) gaining momentum
ICE Midland WTI (HOU): trading activity (ADV/Open Interest) gaining momentum ICE Midland WTI American Gulf Coast futures (code: HOU) ADV and OI 16,000 90,000 14,000 80,000 70,000 12,000 60,000 10,000 ADV (lots) 50,000 OI (lots) 8,000 40,000 6,000 30,000 4,000 20,000 2,000 10,000 - - ADV Avg Monthly
Slide 11: HOU open interest by tenor: extending and growing further out
ICE Midland WTI (HOU) open interest by tenor: extending and growing further out on the forward curve ICE HOU Midland Futures Open Interest by tenor ICE HOU Midland Futures Open Interest by tenor 70 25 Thousands Thousands 60 20 50 40 15 30 10 20 5 10 0 0 Jun-22 Dec-22 Jun-23 Dec-23 M1 - M3 M4 - M6 M7
Slide 12: HOU physical deliveries & EFPs also gaining momentum
ICE Midland WTI (HOU): physical deliveries & EFPs also gaining momentum ICE Midland WTI American Gulf Coast futures (code: HOU) Physical Delivery & EFPs 16,000 14,435 14,000 12,898 12,448 11,793 11,859 12,000 11,357 11,162 10,592 9,808 10,000 9,047 9,062 8,962 ADV (lots) 8,000 7,374 6,156 5,908 5,71
Slide 13: HOU crude quality specs further aligned with Platts
ICE Midland WTI (HOU) crude quality specs further aligned w Platts ▪ As announced on Feb. 28, 2024, HOU spec further aligned with Platts WTI Midland spec as included in Dated Brent ▪ Changes to HOU spec: addition of max Iron content; combined Nickel/Vanadium max content replaced by individual max co
Slide 14: The addition of Midland to the Brent complex: smooth and successful
The addition of Midland to the Brent complex: smooth and successful 14
Slide 15: Addition of Midland WTI to Brent Complex: impact on pricing
The addition of Midland WTI to the Brent Complex: smooth and successful. Impact on pricing similar to expectations. Source: S&P Global Commodity Insights - Europe, Eurasia and Africa Crude Oil Markets Short-term Outlook, March 2024. Data as of Feb. 21, 2024. ▪ Pricing: from May 2023 through late Jan
Slide 16: Addition of Midland WTI to Brent Complex: impact on physical volumes
The addition of Midland WTI to the Brent Complex: smooth and successful. Impact on physical volumes similar to expectations. Source: Platts Crude Oil Marketwire. Data assembled by ICE. Data through February. ▪ Volumes: from June 2023 through February 2024, an average of 10 cargoes of Midland per mon
Slide 17: Majority of Midland WTI cargoes delivered into Dated Brent load at Houston terminals
The majority of Midland WTI cargoes delivered into Platts Dated Brent Market on Close window load at Houston terminals. Note: Houston terminals in black. Source: S&P Global Commodity Insights. Data through mid-January. ▪ From Platts performance tracking. Physical performance is reviewed against publ
Slide 18: HOU key points: effective management of price risk and physical supply risk
ICE Midland WTI (HOU) key points: effective management of price risk and physical supply risk ▪ Price risk management: ▪ HOU offers a more direct, more efficient (simpler) and more cost-effective way for producers, refiners, and traders to hedge USGC exposure. Also a way to minimize unnecessary expo
Slide 19: Contacts and resources
Contacts and resources For more information on ICE Midland WTI Futures (HOU) Mike Wittner Scott Mullervy Kevin Kelly Jeff Barbuto Global Head of Oil Director, US Crude & Senior Market Manager, Global Head of Oil Market Research Options Market US Crude & Options Development +1 646 733 5007 +1 713 210
Slide 20: Thank You
Thank You 20
Slide 21: Limitations
Limitations The information and materials contained in this document - including text, graphics, links and other items - are provided “as is” and “as available.” ICE and its subsidiaries do not warrant the accuracy, adequacy or completeness of this information and materials and expressly disclaims l
Slide 22: About Intercontinental Exchange
About Intercontinental Exchange Intercontinental Exchange (NYSE:ICE) is a Fortune 500 company that operates a leading network of global futures, equity and equity options exchanges, as well as mortgage technology, and global clearing and data services across financial and commodity markets. The New
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