Singapore's new commodities exchange is set to become the first in Asia to offer the two dominant futures contracts for crude oil. Thomas McMahon, chief executive of Singapore Mercantile Exchange (SMX), announced on Friday that the company will be adding Brent futures to its product offering, in addition to the West Texas Intermediate (WTI) contracts it has already announced.
The cash-settled contracts will be denominated in euro and traded in lots of 1,000 barrels each, with maturities going out to 12 months. WTI is used as the global benchmark for oil prices, but Brent is also widely traded.
"With robust growth in Asian economies, SMX expects growing interest amongst traders and investors to use this benchmark for their complex physical hedging and investment needs," said McMahon, in a statement. "For anyone with a euro-related energy business, this contract would be a perfect hedge, alternatively companies with US dollar exposure could diversify their currency hedging requirements into the euro-denominated Brent Crude contract."
Singapore regulators have given SMX in-principle approval to operate a multi-product commodity derivatives exchange. It will go live in August 2010, using an electronic trading platform. The first phase of product launches will include a gold futures contract with physical delivery in high-security vaults in Singapore and the WTI crude oil.
