No, cash settlement may also work. For instance, Brent crude has 

a sophisticated and liquid spot market, and its futures contract 

that is traded on ICE is cash-settled against ICE Brent Index (cash 

market price of Brent) at contract expiry.

Compared with cash settlement, physical delivery will better link 

its futures prices to the spot market. As physical delivery will force 

the prices of futures and cash to converge, the integrity of the 

contract enables the futures market to better support the physical 

market.

Commodity futures already listed in China, including crude oil 

futures, are all physically deliverable.

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