The key reason for Brent and WTI to gain international pricing power lies in the mode of "financial center+crude oil producing area", in which the seller's monopoly pricing is the key. Taking Brent crude oil as an example, it was introduced in 1980s, which was an important measure for Britain to prevent the risk of oil crisis. At that time, London's financial status need not be said. Brent is rich in light and low-sulfur crude oil, and the local pipeline storage facilities are complete, which can be transported to European countries through the Mediterranean.
However, China's crude oil production is obviously insufficient, and the main mode is "financial center+crude oil consumption place".
Second, oil delivery: self-produced oil VS foreign oil.
The deliverable oil products of overseas crude oil futures are mainly local. Brent benchmark crude oil price system includes four kinds of delivery oil products, all of which are light and low-sulfur crude oil produced in Beihai Oilfield, referred to as "BFOE" (Brent, Fortis, Oseberg, Ekofisk). WTI's deliverable oils include 6 kinds of domestic oils in the United States and 5 kinds of oils from other countries.
Of the seven crude oils that can be delivered in China crude oil futures, six are produced in the Middle East and one is produced in Shengli Oilfield in China.
Third, long-term curve: continuous VS discontinuous.
Brent and WTI have been listed for 7 years and 9 years respectively, and the total number of contracts is around 100. Recently, the contract trading has been relatively active for 20 consecutive months, and a continuous forward curve has been constructed, and the price system is very mature.
The content of this article comes from: China Law Publishing House "General Knowledge Series of Legal Life"