The Auspice Commodity Indices capture the risk and return profiles of unique commodity markets such Canadian Natural Gas and Canadian Crude Oil. They represent investable benchmarks in commodities that were previously inaccessible to retail investors.
Canadian Crude Index
The Canadian Crude Index™ (CCI™) was created by Auspice and represents a simple, transparent and liquid benchmark for oil that is produced in Canada.
The CCI™ Reference Price represents the fixed price in USD per barrel for the three to four contract months that contribute to the index (see holdings below).
The CCI™ Excess Return Index reflects the returns that an investor would expect to receive if they held the contracts that make up the CCI™ Reference Price and rebalanced them each day.
BACKGROUND FACTS ON CANADIAN OIL
- Canada has the third largest oil reserves in the world (CAPP, 2014). Over 90% of these reserves are located in Western Canada (IHS CERA, 2013) and are some of the most reliable sources of oil in the world.
- Western Canadian Select (WCS) is the dominant grade for heavy sour physical crude oil in Alberta (Alberta Energy, 2013). Currently, WCS trades at a discounted price to Western Texas Intermediate (WTI). See Chart 1.
- The landlocked location and transportation constraints contribute to the WCS price discount. As the seventh biggest producer globally, efforts are being made to find alternative transportation mechanisms.
- Increased accessibility to global markets could increase the demand of WCS. Other heavy sour crudes, like the Maya (Mexico) blend (Alberta Government, 2013), currently trade at a premium to the WTI.
Who should invest?
The CCI was created to give speculators a tool to get direct exposure to Canadian Crude Oil. Prior to this it was almost impossible for a retail investor to get this type of exposure.
Why speculate in Canadian Crude?
The two most common reasons to speculate are:
- To gain exposure to Canadian Crude oil without the business risks of buying specific resource equities.
- To speculate on the differential between Canadian Crude and WTI.