How Iranian Oil & Saudi Dollar Peg Will Change the World of Energy
By JC Collins
At some point in the first quarter of 2016 China will introduce their version of London’s Brent and the WTI crude futures contracts. The Shanghai International Energy Exchange (INE), a third international crude benchmark, will price energy in renminbi and will serve as an alternative to the western dominated contracts.
Alternative benchmarks have been attempted before, and Russia is attempting to develop its own benchmark based on the ruble. The challenge which any new and alternative benchmark will face is one of sustained liquidity. The internationalization of the Chinese currency and its inclusion into the Special Drawing Right basket of the International Monetary Fund will create a yuan liquidity market which can support the INE through the initial start-up phase.