Chinese oil contract to rival US WTI and UK's Brent is born

Chinese oil contract to rival US WTI and UK's Brent is born

Chinese oil contract to rival US WTI and UK's Brent is born

Elsewhere, at least two Shandong independent refineries including Wonfull Petrochemical, have also participated in the morning trading session Monday, though majority of the independent companies have chose to stay on the sidelines on the debut trading session. The contracts, which are open to foreign investors, end years of delays and setbacks since China's first attempt to list the securities in 1993. The world's biggest oil buyer wants to challenge the dominance of Brent and New York's West Texas Intermediate as global benchmarks and promote the use of the yuan in worldwide trade, a key goal for Asia's biggest economy.

The media outlet added that for their part, Brent and WTI September contracts were traded at $69.78 and $65.78 a barrel, respectively.

In post-settlement trading, when volumes are thinner, prices for both benchmarks slipped in tandem with equities markets, and then dropped again after industry group American Petroleum Institute (API) reported a larger-than-expected rise in US oil inventories. According to observers, the country's yuan-denominated oil contracts could emerge as a brand new benchmark, providing Beijing with extra pricing powers and help it internationalize the yuan. Analysts had expected a 2.5 million increase.

We also don't know if the behind-the-scene talks between the USA and China will prevent a looming trade war.

The most-active September contract opened at 440.4 yuan per barrel from a reference point of 416 yuan, and jumped to as high as 447.1 yuan in the first few minutes. About 15,000 contracts had changed hands as of 11:30 a.m. local time. To attract greater trade participation, Beijing plans to exempt foreign traders and organizations from income tax.

While the nation hopes to establish a benchmark for global oil transactions, whether the Asian nation would achieve that goal has been the subject of hot debate. "In the long run, yuan crude price will mirror the moves of Brent", said Chen Tong, Shanghai-based senior crude analyst at First Futures, as quoted by the news agency. Similar hurdles have kept foreign investors as bit players in China's giant stock and bond markets.

Meanwhile, Wood Mackenzie said in a note that the impact of Shanghai crude futures on global crude prices will be marginal if there is not enough liquidity.

Oil prices rose on Tuesday, pushed up by the concern that tension in the Middle East could lead to supply disruptions.

In 2017, the total traded value of ShFE's steel derivatives contracts was $4.4 trillion from domestic investors.

While he is not particularly watching it closely for the moment, ANZ's Chinese desk is very focused on it, he said.

Yang Xiaoping, president of BP China, said China's crude oil futures offer companies in the real economy a hedging tool that can better reflect market conditions in Asia.

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