Sydney — How serious is China about setting up its new Shanghai crude oil futures as a challenger to Brent and West Texas Intermediate (WTI)? It’s certainly doing some things right. A functioning commodity benchmark requires crucial infrastructure. First, you need enough suppliers to ensure individual producers can’t have too much influence. A spread of producers also creates stability, preventing situations, such as happened in 2017 when the failure of a single Brent pipeline risked sending prices spiraling out of control. Next, you need a decent array of customers. A primary reason Brent dominates, being used to price about two-thirds of the world’s oil, is that almost every barrel can be shipped from its fields in the North Sea to any port in the world. WTI’s delivery point in Cushing, Oklahoma, is hundreds of kilometres from the ocean — and the US in any case banned crude oil exports for 40 years until 2015. Away from the physical side of things, you need a well-honed market str...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.