Market participants in the U.S. physical crude oil sector often encounter challenges related to Midland crude oil supply.
Exporters receive off-spec Midland WTI at U.S. Gulf Coast (USGC) terminals, as reported in the oil trade press, and refiners unexpectedly receive non-ratable volumes of Midland WTI from suppliers, according to market participants.
For those who have faced or are concerned about such issues, the ICE Midland WTI Futures contract (HOU) provides a viable solution to mitigate these risks.
The HOU contract serves as a benchmark for Midland-origin and Midland-quality crude production and exports. Its pricing and physical delivery point is in Houston, the most active crude trading hub on the USGC. Going to expiry in the HOU contract guarantees the physical delivery of on-spec and ratably delivered Midland WTI crude oil. This oil can be utilized in U.S. domestic refineries or exported to European and Asian refiners. Additionally, in the Atlantic Basin, Midland WTI is deliverable into the Brent complex.
Deliveries of Midland WTI crude oil through the HOU contract averaged 4.4 million barrels each month in the second half of 2023. ICE, as a regulated exchange and clearinghouse, provides anonymous trading and clearing with stringent procedures in place. This ensures a robust, fair, and transparent marketplace with clear protocols for physical delivery. Notably, every HOU delivery accrues interest on delivery margins at the ICE deposit rate.
Beyond managing price risk, HOU effectively addresses physical supply risk. Guaranteed deliveries of on-spec Midland WTI crude via HOU contribute to timely loading of export vessels, averting demurrage fees. Refineries in the U.S., Europe, and Asia receive crude volumes as planned, on-spec and at the agreed-upon volumes and delivery timeframe, facilitating smooth operations.
HOU will always expire three business days before the 25th day of the month. If you still have a position post this time, there are still plenty of options:
Please see ONEOK HOU Futures Contract and General Transfers (oneok.com) and HOU Futures Contract and General Transfers (enterpriseproducts.com) for more details.
Customers can benefit from margin offsets as high as 95% when clearing HOU alongside other oil positions cleared at ICE Clear Europe, with offsets across a range of 700 oil contracts, including ICE Brent, ICE Gasoil, ICE Midland WTI, ICE Dubai (Platts), ICE Murban, as well as RBOB Gasoline.
A benchmark for pricing U.S. crude production and exports, with a delivery point in Houston, the most active crude trading hub on the U.S. Gulf Coast. Deliverable into the MEH and ECHO terminals, barrels from the Permian basin are recognized for their consistent high quality.
Additional Inter-commodity spreads will be offered to help customers mitigate price risk between various locations and grades:
Each contract represents 1,000 barrels and the price increment is $0.01 per barrel. View Houston area map
A predictable quality specification that reflects WTI crude delivered directly from the Permian Basin. Deliverable into MEH and ECHO establishing consistent quality and price transparency in the Houston market.
Parameter | Units | Min | Max | Required Test Method |
| API Gravity | °API, 60°F | 40.0 | 44.0 | ASTM D1298 or D5002 |
| Sulfur Content | % (m/m) | 0.20 | ASTM D4294 | |
| Mercaptan Sulfur | ppm Wt | 75 | UOP 163 | |
| RVP | PSI | 9.5 | ASTM D6377 | |
| BS&W | % (v/v) | 1.0 | ASTM D4007 per API MPMS 10.4 | |
| Nickel | mg/kg | 2.0 | ASTM D5708, Procedure B or D8252 | |
| Vanadium | mg/kg | 2.0 | ASTM D5708, Procedure B or D8252 | |
| Iron | mg/kg | 10.0 | ASTM D5708, Procedure B or D8252 |
Renaissance Energy Advisors' research note explores the increasing importance of ICE's Midland WTI (HOU) contract in global oil markets with the U.S. Gulf Coast continuing its growth as a key pricing center for hedging and risk management.
In a May 2024 webinar held by ICE, Mike Wittner, Global Head of Oil Market Research, presented on how ICE's Midland WTI contract (HOU) provides an effective solution to manage price & physical supply risks. Click the link below to watch the video replay and view the presentation slides.
Renaissance Energy Advisors' research note explores the increasing importance of ICE's Midland WTI (HOU) contract in global oil markets with the U.S. Gulf Coast continuing its growth as a key pricing center for hedging and risk management.
In a May 2024 webinar held by ICE, Mike Wittner, Global Head of Oil Market Research, presented on how ICE's Midland WTI contract (HOU) provides an effective solution to manage price & physical supply risks. Click the link below to watch the video replay and view the presentation slides.
