Shanghai crude oil futures jump more than 6%

China's first oil futures off to a flying start as Beijing vies for pricing power
China, US trade dispute weighs on prices
Author

28 March, 2018

The Shanghai Futures Exchange is playing down speculation that the aim is to create a global oil benchmark, stressing that it will be a long time before the contracts become a major hedging tool for global and domestic oil producers, refiners and consumers.

The oil futures with delivery in September began the stock exchange session at a price of 440 CNY per barrel, and by noon almost 15,000 contracts changed their owners.

China's yuan-denominated crude oil futures have launched in Shanghai, and were up sharply in the first day of trading. US West Texas Intermediate (WTI) crude futures fell 26 cents to $65.62. Here are some of the other key questions.

"We will play an active part in the crude futures trading".

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore said there was "considerable resistance" as current or higher prices opened the possibility that even more U.S. shale producers could come back online. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts.

But foreign investor response to those openings has been tepid, and while analysts say the yuan oil futures will help further internationalise China's markets and increase crude price transparency in Asia, the dollar's position as the world's petro-currency remains solid. The Asian nation's purchases reached a record high in January. A spread of producers also creates stability, preventing situations like Brent saw a year ago, where the failure of a single pipeline risks sending prices spiralling out of control.

That's different to global exchanges, like the CME, which uses a ratio based on an investor's traded volume. There's also concern over volatility. Deliveries will be from ports of Oman, Qatar, Yemen, Iraq (Basra) and East China. In recent years, it repeatedly delayed its new contract amid turmoil in equities and financial markets. Speculators are driving prices higher because of the fear of the unknown, but gains are being capped by fear of the known.

More news: Juan Martin del Potro over the moon after beating Federer

At the close, the Shanghai Composite index was down 0.6 percent at 3,133.72, while the blue-chip CSI300 index also lost 0.6 percent at 3,879.89. But by 5 p.m. Shanghai time, 37,655 of those Brent contracts had changed hands.

Trading margins for the futures were set for 7 percent of the contract value. One positive is that the contract will be based on seven different grades, mainly from the Arabian Gulf but also including China's own Shengli.

Skeptics argue that hurdles such as capital controls, regulatory risk and market intervention in other Chinese securities have made investors cynical about the prospect of Shanghai futures becoming a regional price-setter. In early 2016, the then-head of the LME said it was possible some Chinese traders did not even know what they were trading as investors piled into everything from steel reinforcement bars to iron ore.

According to Wei, this activity is especially important amid the US-Chinese row over the Trump administration's new high tariffs on Chinese imports, which is largely seen as nothing short of a trade war between Beijing and Washington.

That remains to be seen. Restrictions on moving money in and out of the country have been tightened in the past two years after a shock devaluation of the yuan in 2015 prompted a surge in money leaving the mainland.

"The. trade war story. should be taken into account when trying to quantify the potentially bullish effect of the geopolitical element in oil markets", said analysts at consultancy JBC Energy.

Shell International Eastern Trading the trading arm of Royal Dutch Shell, was heard to be the seller, said multiple sources that participate in the market, although a Shell spokeswoman declined to comment.


More news


  • Islamabad United reclaim PSL title

    Islamabad United reclaim PSL title

    Islamabad United beat Peshawar United by three wickets, and lift the PSL trophy for the second time. This stadium has witnessed many historic cricket events in the past.
    Amazon could buy Toys

    Amazon could buy Toys "R" Us stores

    KB Toys went out of business in 2009 and Toys R Us acquired the brand, according to CNBC . Meanwhile, toy makers are fretting, and retailers and rivals are rubbing their hands.
    Toyota Self-Driving Cars Tests Halted After Fatal Accident

    Toyota Self-Driving Cars Tests Halted After Fatal Accident

    Rafael Vasquez, a 44-year-old test driver from Uber, was behind the wheel of the Volvo XC90 SUV at the time, according to police. Investigators from the National Transportation Safety Board are in Tempe this week to collect information on the collision.
  • No charges in Alton Sterling's fatal shooting

    No charges in Alton Sterling's fatal shooting

    Sterling, 37, was shot and killed by one of two police officers who confronted him outside a convenience store in July 2016. Their suit alleges the shooting fit a pattern of racist behaviour and excessive force by the Baton Rouge police.
    Neymar Promises Lionel Messi He Will Reject Real Madrid for Barca Return

    Neymar Promises Lionel Messi He Will Reject Real Madrid for Barca Return

    Neymar's future has been up in the air in recent months, with Real Madrid openly courting the former Barcelona man to come on board.
    Fortnite's New Blitz Mode Is Changing, Here's How

    Fortnite's New Blitz Mode Is Changing, Here's How

    When you are invited, you will receive an email with a link to download the game from the App Store. No, the storm starts closing in ASAP, so you need to get your squad to the circle right away .
  • Didi in Delhi meets Kanimozhi, Pawar; Sonia likely on March 28

    Didi in Delhi meets Kanimozhi, Pawar; Sonia likely on March 28

    Reports say Mamata also met DMK leader K Kanimozhi and K Kavitha, daughter of Telangana Chief Minister K Chandrasekhar Rao. She is expected to meet Sonia Gandhi on Wednesday. "We should help the parties where they are strong", she said.

    China launches crude oil futures

    The country also hopes that yuan-denominated futures contracts will help its currency play a bigger role in the global economy. Crude oil futures slipped on Monday, but losses were capped by a rebound in stock markets and escalating Saudi-Iran tensions.
    Warriors star to have MRI exam on MCL 'strain'

    Warriors star to have MRI exam on MCL 'strain'

    He rehabs his ankle for the last couple of weeks, gets that strong, and then the knee goes. "It's like a juju or something on us". Our last news headline is Jordan Bell going to Steph Curry for advice on how to deal with his ankle injury.
  • Rahul Gandhi attacks Prime Minister Narendra Modi over his app, BJP counters

    Rahul Gandhi attacks Prime Minister Narendra Modi over his app, BJP counters

    The app, the party claimed was one-of-its kind, which offers users a "guest mode" that does not require any permission or data. Law and IT Minister Ravi Shankar Prasad has accused Congress of having links with Cambridge Analytica.
    Spanish supreme court charges 13 Catalan leaders with rebellion

    Spanish supreme court charges 13 Catalan leaders with rebellion

    She said: "I start a hard road, that of exile", and is believed to be in Switzerland where Anna Gabriel is now living. Catalan television aired footage of more crowds in towns in the region, including Vic and Tarragona.
    Senate Sends 2232-Page Omnibus Spending Bill to Trump

    Senate Sends 2232-Page Omnibus Spending Bill to Trump

    The House has voted to advance a $1.3 trillion omnibus spending package, overcoming objections from conservative Republicans. The bill avoids a government shutdown that would take place at midnight on Friday. "No one has read it.