Yuan-based oil futures begin trading on Shanghai market

Mar 29, 2018, 01:53
Yuan-based oil futures begin trading on Shanghai market

"Glencore's first bid reflected the high participation and enthusiasm of foreign traders for Chinese crude oil futures", said Yang Xidong, general manager of Xinhu Futures Co Ltd.

BEIJING, March 26 (Reuters) - Shanghai crude oil futures launched on Monday with mom-and-pop and institutional investors fuelling much higher turnover than many expected for China's new commodity benchmark that is aimed at dominating the Asian market.

Trading of the new oil futures contracts for September settlement started on the Shanghai International Energy Exchange at 440.20 yuan ($69.70) per barrel, reports Chinese daily the South China Morning Post.

Specific issues for traders include Shanghai's shorter trading hours, split into three slots, with the afternoon session ending at 3:00 p.m. local time (0700 GMT), just before London ramps up.

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The American Petroleum Institute (API) has reported a major surprise build of 5.321 million barrels of US crude oil inventories for the week ending March 23, with the market expected to respond by erasing last week's gains.

China's first ever crude-futures contract has been launched, as the country seeks to have a greater say over pricing and challenge benchmarks in Europe and the U.S., Bloomberg reported Monday.

May West Texas Intermediate crude lost 33 cents, or 0.5%, to settle at $65.55 a barrel on the New York Mercantile Exchange.

USA trade policy against China last week rattled the broader markets.

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As a result of these tight reins on the new market segment, some analysts believe global investors would be discouraged to tap the Shanghai oil futures. "Refinery maintenance is in full swing", causing "big builds in crude-oil stocks and big draws in products", he said. The global benchmark traded at a $4.56 premium to WTI.

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.

As for geopolitical tensions, there was said to be an escalation on one front and an easing on another: supporting prices somewhat on Monday was Saudi Arabia air defences shooting down seven ballistic missiles fired by Yemen's Iran-aligned Houthi militia on Sunday, some of which targeted Riyadh. Yuan-based futures will help promote the yuan as a global currency. The contract closed at 429.9 yuan per barrel ($68.22). Some 18,540 lots have reportedly been sold and purchased so far.

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