Launch of yuan crude contract no guarantee that it will give China pricing control over commodity
Analysts say that while the contract will be warmly received by traders, it will take a long time before it can establish itself as a regional benchmark
The launch of yuan-denominated crude oil futures next month is yet another attempt by China to wield its economic influence, but traders warn that although the contract is likely to be actively traded it will take some time before it can establish itself as a global benchmark.
“Active trading will probably be seen because investors are highly interested in the contract,” said Liu Yang, analyst at Citic Futures. “Crude oil has a big impact on a wide range of industries and a large number of companies have been expecting the trading to start [for some time now].”
China Securities Regulatory Commission (CSRC) last week announced start the futures trading on March 26, six years after its original launch date, with foreign players set to participate in trading on the country’s futures market for the first time.
The contract, based on medium-density crude, will be traded on the Shanghai International Energy Exchange, a 5 billion yuan (US$790 million) subsidiary of the Shanghai Futures Exchange. The energy exchange is based in the city’s free-trade zone, the mainland’s first Hong Kong-style free marketplace for further economic reforms.
“It is far from becoming a regional benchmark,” said Huang Lei, an independent commodity futures analyst. “The role of the yuan-denominated contract has been overstated during the past years.”
China, the world’s biggest net importer of crude oil, bought 420 million tonnes of the commodity in 2017, up 10.7 per cent from a year earlier.
