WTI-Linked Derivatives Draw Trader Interest
Trading in the WTI-linked derivatives has been increasing in recent months ahead of the change to include WTI Midland. Contracts have been traded as far ahead as December 2026 for WTI Houston and December 2025 for the WTI Midland. The total level of open interest across the Midland and Houston contracts, a good measure of the success of a contract, reached 300,000 contracts at the end of December 2022, an increase of 60,000 lots over the past 12 months.
Traders are increasingly looking to manage any associated price risk to the underlying markets through the trading of the listed futures markets listed at CME Group. Trading interest in the WTI and U.S. grades markets is coming from trading firms, producers and refiners on both sides of the Atlantic.
The total volume of WTI Midland crude oil futures vs. benchmark WTI futures averaged 52,000 lots per month in 2022, doubling the volumes seen in 2021. Over the same period, monthly traded volumes of WTI Houston futures have reached just under 74,000 lots per month, up from around 62,000 lots per month in the prior 12-month period.
Europe Turns to U.S and Saudi Exports
The volume of Russian crude exports to Europe has fallen in recent months ahead of the sanctions imposed in December 2022. The International Energy Agency (IEA) noted in their November 2022 report that Russian crude oil imports had fallen to 1.4 million barrels per day. At the same time, U.S. crude exports to the EU surpassed this level reaching 1.55 million barrels per day based on October 2022 U.S EIA data. U.S crude accounts for around 12% of EU refinery processing volumes, the IEA noted in its latest November 2022 report.
The chart above shows the volumes of Russian crude oil imports into Europe by week and compares the 2022 levels with one year prior. Since September 2022, the Bloomberg/Bruegel data clearly shows a sharp decline in the volume of Russian crude arriving into European ports.
European refiners have also been stepping up purchases of other crude streams and some of the Middle Eastern exporters have been able to increase exports to the region. S&P Global Platts noted that Saudi Arabian exports to Europe increased steadily in 2022. Total exports from Saudi Arabia year to date October 2022 reached around 600,000 barrels per day, the highest level since 2019.
Trading Interest in U.S Crude to Remain
European refiners have processed greater volumes of WTI-linked crudes in 2022 and this looks set to continue into 2023 and beyond.
An expanded role for WTI means more North Sea crude oil traders and the wider market will price either directly or indirectly against it, growing the influence of U.S. crude oil around the globe.
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