Monday, June 14, 2010

TMX to launch WCS Canadian crude futures contract

*TMX to launch Canadian crude contract on June 18

*Contract meant to help market players better hedge risk

*WCH to compete with other North American sour contracts

NEW YORK, June 14 (Reuters) - Canadian derivatives marketplace Montreal Exchange Inc said Monday it will launch a cash-settled futures contract based on Canadian heavy crude, as Canada boosts its oil production and oil traders look for new ways of managing risk.

The contract, based on Canadian benchmark Western Canadian Select, will be listed on Montreal Exchange's SOLA electronic trading platform on June 18, said Montreal Exchange, a unit of Canada's TMX group (X.TO: Quote).

The contract "can be used by market participants to better manage the risk associated with the fluctuation of the price differential between heavy crude and oil light crude oil," said Montreal Exchange CEO Alain Miquelon, in a written statement on Monday.

The contract will trade under the ticker WCH.

Canada, which is already the largest supplier of crude oil to the United States, is expected to double its output of heavy crude by 2020, the exchange said.

Many U.S. and Canadian crude producers and consuming companies gravitate towards the highly liquid NYMEX West Texas Intermediate CLc1 futures contract to help hedge short and long-term risks in energy markets. But differentials between WTI and heavy grades have become highly erratic in recent years.

That helped to prompt Saudi Arabia last year to switch the basis of its crude export pricing to the United States to the Argus Sour Crude Index (ASCI) and away from WTI. Several contracts based on ASCI, which represents a variety of U.S. Gulf offshore crudes, have since emerged, launched by exchange operators including NYMEX. Trading in the new contracts has been slow so far.

Canada's WSC grade contract is the latest addition to the growing number of heavy crude contracts on offer in North American markets.

The WSC contract is already generating some interest among producers and blenders of WCS grade Canadian crude.

"We will have a look at it," said Brian Ferguson, CEO of Cenovus Energy Inc., which produces and blends Canadian crude, at an investment conference.

"We have tended to focus on WTI because that's more liquid. We'll wait and see how the WCS market unfolds and if it has the sort of liquidity that we think is sufficient." (Reporting by Joshua Schneyer and Scott Haggett; Editing by John Picinich)

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