CME drops 24/7 oil futures plan over market risks
CME Group has abandoned plans to launch round-the-clock trading in a new oil futures contract following criticism from industry participants. The company acknowledged that moving to 24/7 trading without further analysis could have unintended consequences and increase risks for the market.
According to Bloomberg, the proposed contract would have been one-tenth the size of existing Micro WTI futures. The initiative drew the attention of the U.S. Commodity Futures Trading Commission (CFTC), which began examining the implications of round-the-clock trading in oil derivatives.
One of the main concerns was low weekend liquidity. Market participants warned that a small number of trades during such periods could have a disproportionate impact on the price of WTI, one of the world's key oil benchmarks.
Oil industry pushes back against 24/7 trading
The American Petroleum Institute (API) warned the CFTC that round-the-clock trading would require additional weekend staffing and make hedging more complicated for commercial market participants. Price swings could also trigger margin or collateral calls outside normal business hours.
BP raised similar concerns. CME CEO Terry Duffy said the decision to abandon the launch followed extensive discussions with industry participants.
CME had initially sought to offer a U.S.-regulated alternative to offshore venues, where 24/7 oil-linked products became more popular following the outbreak of the war with Iran. However, market participants were concerned that sufficiently large weekend trading volumes could influence prices across the broader oil market.
Duffy said the company had aimed to provide a safer and more transparent option for round-the-clock trading under CFTC oversight. For now, CME has decided not to proceed with the product without further analysis of the potential consequences.
Europe starts tapping diesel reserves
CME's decision comes during another period of heightened volatility in energy markets. Oil prices fell after European countries agreed on a coordinated release of diesel fuel from reserves to ease shortages of refined products.
The market is assessing the potential decline in short-term import demand resulting from the measure. At the same time, supply risks remain due to constraints on refining capacity and geopolitical tensions.
Earlier, we reported that silver shifted into sideways trading as inflation concerns intensified following a sharp rise in oil prices. Higher energy costs strengthened expectations that price pressures could remain elevated.
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