March 20, 2019 / 8:27 PM / 6 months ago

Enterprise, CME to hold second electronic auction of U.S. crude for export

NEW YORK, March 20 (Reuters) - Enterprise Products Partners LP said on Wednesday it would team up with exchange operator CME Group to conduct a second electronic auction within about a month for crude exports.

Enterprise said bids for West Texas Intermediate (WTI) light sweet crude oil produced in the Permian basin will be accepted during the auction on April 4, 2019. The cargo will be exported from Enterprise’s Houston terminal.

The auction comes as the United States heads towards becoming a net exporter of crude and refined fuels consistently after surpassing Saudi Arabia and Russia last year as the world’s biggest oil producer. International Energy Agency officials recently estimated that the nation would reach net exporter status by 2021.

Enterprise and CME’s first crude cargo auction was held on March 5 and the winning bid was a 46-cents-per-barrel premium to CME’s newly launched WTI Houston futures contract, for one cargo of about 650,000-850,000 barrels of crude.

A total of 17 participants and buyers from around the world have expressed interest in participating in the auction, CME said.

Commodities merchant Glencore Ltd lifted the first WTI Houston cargo via the auction process and hopes to add liquidity to the contract and auctions going forward, David Keller, crude trader at Glencore said in a statement in March.

From the Permian Basin, Enterprise transports crude oil to Houston through the Midland-to-ECHO pipeline system, which has 575,000 barrels per day (bpd) of capacity.

Traders have said few people globally have adopted the method of auctioning crude export cargoes.

“The Enterprise auction is interesting,” said Morningstar analyst Sandy Fielden. “This is packaging crude for export in cargo size lots in order to reduce the hassle of getting crude out of Houston pipelines and onto a ship.”

While Enterprise’s approach cuts back on the effort an exporter has to make to assemble exports by leaving that work to Enterprise for fees, it is likely going to deter producers looking to build long-term relationships with buyers, Fielden said.

“It’s more of a ‘spot’ cargo export process than a term deal structure,” he said. (Reporting by Devika Krishna Kumar and Laila Kerney in New York; editing by Diane Craft)

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