"The trouble with boxing is that too often it ends in sadness." - Barry McGuigan (1961- )
Something is brewing in the Far East, and it’s not Jin Xuan tea. Or not solely that.
In the financial capital of the world’s second largest economy, the Shanghai International Energy Exchange – otherwise known as the INE – is on the verge of shaking the oil world to its core. According to sources inside the People’s Republic, the INE is set to begin trading its own crude contract from this October.
The two major trading classifications for crude oil – Brent and West Texas Intermediate (WTI) – have been used as the stabilising benchmarks for oil trading for decades, with the Brent standard governing the pricing of two thirds of globally-traded crude oil supplies.
In principle, a third contract in the mix could disrupt the dominance of the petroleum products trading out of both Sullom Voe in Shetland and Cushing, Oklahoma. In actuality, it could do far more: the new contract will be traded in renminbi, and has the potential to cripple or put paid to the petrodollar, the de facto unit of oil trading for the past 42 years.
Despite the two day trading dive that started on Black Monday 24th August 2015 and saw 15.5 per cent wiped off the Shanghai Composite Index, the march towards a Chinese-based oil contract has pressed forward unabated.
As analysts ponder whether the financial superpower of the Eastern hemisphere and one of only two fourteen digit economies on Earth is about to slip into recession, the People’s Republic is winding up for a coup de grãce in the commodities market.
As the world’s second largest oil and single largest energy consumer, China is a heavyweight in the global energy story. However, a boxer that does not enter the ring cannot win a title.
Let’s hope that this pugilist’s foray into the Square will not end like so many bouts for fighter and spectator alike....
Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ
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