THIS may not be an earthquake of immense magnitude, yet a shift in tectonic plates has definitely taken place, signifying, in the least, a change in direction.

As Saudi crude exports to the US touched its lowest ebb in 22 years in August, Saudi Aramco announced on Nov. 1 the decision to switch away from West Texas intermediate (WTI), the key US benchmark blend that is traded at the NYMEX futures exchange as US Light Sweet Crude, to Argus Sour Crude index (ASCI), a price index of Gulf of Mexico crudes published by Argus.

Oil markets enjoy certain peculiarities. Saudi Arabia still exports significant quantities of oil to the US, but its physical crude output is not actually traded on the exchange. This is done separately through contracts between countries and oil companies — and until October end Saudi Arabia based its prices on the dominant benchmark, the WTI. And this had its pitfalls. The Kingdom has been explicitly unhappy, for some time now, for using WTI as a basis for its oil sales. For several years now, Saudi Arabia has argued that it has not been well served by the New York Mercantile Exchange’s faith in its oil. Saudi Aramco has been emphasizing that WTI does not represent the global picture of crude supply and demand and is unable to price its crude properly.

Historically, Saudi oil is not traded but is sold at fixed discounts to WTI, set in advance. With WTI bouncing around, Saudi Arabia was increasingly finding it difficult to set a competitive price of its oil against rival sour crudes. On the other hand customers were getting annoyed too; by the time the crude cargoes reached the destination, WTI’s oscillations could make Saudi crude either dirt cheap or horribly dear. In addition, Riyadh wanted its oil to be treated as a tangible, physical commodity — and not a paper product for traders on Wall Street hedging against the weak dollar.

And then most of the world’s crude today is not light, or sweet. As the North Sea and onshore American wells deplete, the crude we burn today is getting heavier with rising Sulfur content. BP says as much as two third of the world’s crude oil supply is now sour. New refineries with expensive desulfurization units and hydrocrackers are chasing the “sour” discount, hoping to make more profit margins buying cheaper, heavier crude oil.

With the WTI benchmarking the light, sweet crude, its lack of similarity to the heavy, sulfurous crude oil that Aramco was shipping coupled with the price volatility of WTI were adding to the woes of Aramco and the likes.

Normally, WTI crude trades at a premium of $1 to $2 to Brent Crude. Last year, when oil traded up to $147 per barrel, the volume of futures contracts for WTI crude skyrocketed. And then last January, there was so much oil stored in Cushing, Oklahoma, that the WTI fell sharply, selling at a discount of $12 to Brent. Volatility has been immense, to say the least. In February, WTI was in such a slump that the sour, heavier ASCI crudes were selling at an $8 per barrel premium to WTI. Only a month later, WTI had soared and ASCI had fallen to a $6 per barrel discount. The dominant crude oil’s volatility and disconnection from the fundamentals of the physical market appeared going one step too far, throwing the oil markets into disarray and putting Aramco in a very discomforting situation.

All this prompted the change of contracts by Saudi Aramco from WTI to ASCI. The index is based on a weighted average of actual prices paid for three crudes pumped out of the Gulf of Mexico — Mars, Poseidon and Southern Green Canyon. These are “sour”, or high-sulfur, crudes, more like Aramco’s Arab Light, so the Argus price index makes a better match.

Interestingly, others could follow suit too. After the move, Venezuela has also indicated it might also take the route. Both Saudi Arabia and Venezuela mainly send sour crude, making their exporters a closer match to the Argus Sour Crude Index than WTI. Other Producers and some customers have also expressed concern in the past that WTI’s delivery point at Cushing, Oklahoma, is too isolated from the international oil market to always reflect the global supply situation — and thus the change.

The move by Aramco after 15 years tracking WTI is a sign of the benchmark’s difficulties.

Yet it is almost certainly wrong to conclude that the move will deal a knockout blow to the benchmark traded on the New York Mercantile Exchange. However, it may be correct to the core that WTI has lost a bit more glitter in its crucial role as an accurate reflection of global oil prices.

It is also a sign that after years of dominance of the established oil benchmarks — the WTI in the Americas, Brent in Europe and Africa, and Dubai and Oman in Asia — changes are now on the horizon. The backing of the world’s biggest oil exporter gives new clout to the five-month-old benchmark, and to the Gulf Coast market where the oil tracked in the Argus index is delivered.

Aramco’s move also may well be an indication that further changes in the world’s oil benchmarks, and indeed in the overall crude markets, could well be in the offing before too long. A potentially more critical yardstick change is likely to take place in a far distant part of the world — East Asia. Virtually all crude sold from the Middle East into Asian markets, including China, is benchmarked from two Middle East crudes: Dubai and Oman. The Argus and Oman benchmarks also bring some diversity to the oil market by tracking sour crude.

Even if the move does not signify anything else, it at least underlines that the dominance of the US based Nymex crude futures contract is definitely under some cloud. The old world order is slowly and gradually disintegrating.