I have no problem with his comment that WTI is less and less importance. I wonder however at why you would not choose a bigger benchmark than Brent. Why not Hardesty Heavy out of Canada or the OPEC blend? Anyway, WTI serves as a benchmark for light crude and the futures contracts traded around its price are no small matter but are smaller than ICE. Chris worked for ICE under its prior name so maybe that’s why he likes it.

His point about Fannie/Freddie type risk is a good one. After Lehman, the brokerage houses stopped trading with each other and started doing trades largely with clearing house like the CME who could guarantee the other side of the trade. When I initially saw that news I took a look at CME and saw it gaining on the prospect of extra business. I have not looked into what kind of risk this exposes them too. If they were to falter it would put a severe crimp into trading of many commodities.

However, lack of liquidity does not necessarily mean crude would tumble. It would certainly be more volatile. I think the floor price for crude remains somewhere nearby as you start running into problems with the U.S.’s #1 supplier, Canada around the $100 per barrel mark. Much lower and they don’t break even and then the growth dries up (that appears to be happening) and maybe even some current pit operations get halted (V would know better than I but they won’t run at a loss for long).

Odds & Ends:

Analyst Watch: (GW) cut to perform at CIBC.