Oil-backed token startup seeks 24/7 market for crude exposure
Energy Substantiation’s WTIC token would represent physical WTI crude, but the startup faces liquidity, legal and industry adoption hurdles.
By Maya Lindqvist · Senior Technology Correspondent
4 min read
Energy Substantiation is trying to create a crypto token backed by physical crude oil, aiming to give investors round-the-clock exposure to a market that still closes on weekends. The effort matters because it tests whether blockchain markets can extend beyond dollars and gold into one of the world’s most traded physical commodities.
The startup’s WTIC token is designed to represent one barrel of West Texas Intermediate crude, Bloomberg reported. JP Thieriot, Energy Substantiation’s co-founder, told Bloomberg the company wants to make oil ownership available to people who have a crypto wallet and a relatively small amount to spend.
The pitch borrows from stablecoins, which created digital claims tied to dollars, according to Bloomberg. Energy Substantiation is applying a similar idea to crude, a harder asset to tokenize because oil must be stored, varies by grade and moves through a complex physical system.
How the token is meant to work
Energy Substantiation says suppliers would add crude to the system through a reverse Dutch auction, offering barrels at a discount to the day’s market price. The company says that structure could help producers earn money from operational inventories such as pipeline line fill and tank bottoms, which may otherwise sit on balance sheets with little direct revenue.
New WTIC tokens would be created through a daily minting process, Bloomberg reported. Token holders would be able to redeem at the daily spot closing price, though Energy Substantiation does not expect many buyers to seek physical delivery.
The company says the design treats the oil backing the token as a spot commodity rather than a derivative, which it says would mean lighter regulation. WTIC is being presented as distinct from oil ETFs or crypto perpetual contracts because it is intended to be backed by barrels rather than futures or other derivatives.
Benchmark WTI and Brent futures trade mainly on CME Group and Intercontinental Exchange, with weekend closures, Bloomberg reported. Interest in 24/7 oil products has grown as geopolitical developments, including the Iran conflict, have affected markets while traditional exchanges were closed.
Small start, large ambitions
WTIC remains tiny. Bloomberg reported that its on-chain value is about $80,000, with a planned debut on LMAX and another $1 million in liquidity expected later.
Thieriot told Bloomberg the startup is working with about a dozen commodities firms and oil suppliers, including one major trading house. He also said Energy Substantiation is speaking with other exchanges and market makers.
Javier Molina, a crypto analyst at eToro, told Bloomberg that launching a token is the easier part and that the harder task is creating an active market. He said Energy Substantiation will need energy companies to participate, not only crypto traders.
The startup also faces competition from existing crypto-linked oil products. Bloomberg reported that tokenized WTI and Brent perpetual futures on Hyperliquid have become the platform’s most actively traded commodity products, while CME has announced plans for smaller crude futures that would trade 24 hours a day, seven days a week, by late August.
Legal and political questions
Christian Catalini, founder of the MIT Cryptoeconomics Lab, told Bloomberg the token’s success depends on whether blockchain ownership can be enforced in the physical world. He said weak links between online records and offline assets would leave traders holding an IOU rather than the underlying commodity.
Energy Substantiation’s plan depends on producers keeping enough inventory available to back tokens, Bloomberg reported. The company says operational inventories are unlikely to drop low enough to endanger the system, even during stressed markets.
The project has also drawn scrutiny in Texas. The Texas Tribune reported in April that Texas Railroad Commissioner Wayne Christian, who serves on the state agency that regulates oil and gas production, is on Energy Substantiation’s advisory board and emailed prospective investors before the token’s launch.
Christian referred Bloomberg’s questions to Energy Substantiation. A company spokesperson told Bloomberg that Christian was asked to serve because of his energy-sector experience and does not run the startup’s daily operations or business decisions.
Energy Substantiation plans tokens tied to Brent crude and Henry Hub natural gas later this year, Bloomberg reported. The company’s broader test is whether claims on physical commodities can trade with the speed and availability of digital assets.
This story draws on original reporting from Fortune.