CME Group, a global derivatives marketplace, along with LOOP LLC, operator of the largest privately owned crude oil terminal in the US, and NEO Markets Inc., an online marketplace for US physical oil transactions, have reached a definitive agreement to develop the first-ever physically delivered crude oil storage futures contract. The new LOOP Crude Oil Storage futures contract will begin trading on Sunday, March 29, for trade date Monday, March 30, pending all relevant CFTC regulatory review periods.
This new contract will provide market participants with an exchange-traded futures contract based on crude oil storage capacity at LOOP’s Clovelly Hub in Louisiana, beginning with the May contract month. Each futures contract will represent the right to store 1,000 barrels of crude oil at the hub for a specific calendar month.
The new storage contract is expected to enhance the liquidity of the existing NYMEX Gulf Coast Sour Crude Oil futures contract, which is physically deliverable at LOOP and will be renamed LOOP Gulf Coast Sour Crude Oil futures. As part of the agreement, CME Group will also broaden the specifications of this sour crude futures contract to include Poseidon, Mars and LOOP Seg 17.
“As global crude oil supply and demand dynamics continue to shift, CME Group remains focused on meeting the risk management needs of our energy customers,” said Martin Fraenkel, managing director, global head of energy poducts, CME Group. “We believe this innovative new solution will help customers manage their physical crude storage price risk, while enhancing price discovery and access to short-term storage capacity along the US Gulf Coast.”
NEO Markets will be hosting monthly auctions of physical LOOP Sour crude oil storage contracts on its NEO Trader platform. Following the auctions, subsequent over-the-counter transactions can be negotiated via the NEO Trader platform and NEO’s voice broker services.
Both contracts will be available for trading electronically via CME Globex, as well as submission for clearing through CME ClearPort, and will be listed by, and subject to, the rules of NYMEX.