The global oil market has been evolving at a cracking pace. China has achieved another ambitious goal, launching yuan-denominated crude oil futures. This project required 25 years of a painstaking job. The launch has been postponed in a few recent years. Eventually, China’s crude futures contracts made the long-awaited trading debut under the INE symbol on the Shanghai International Energy Exchange.
At present, crude is sold at 440.20 yuan per barrel which corresponds to USD 69.71 like oil futures that are traded at the ICE (the Intercontinental Exchange). The world’s biggest oil buyers want to check whether INE will be able to become the benchmark grade for oil pricing. There are weighty reasons for INE to challenge the dominance of Brent and WTI. The oil market has to find out whether investors are interested in the new contract. If this comes to expectations, the yuan will be able to weaken the dollar’s leadership. China has already outpaced the US in terms of volumes of oil imports. Being the top oil consumer, China can easily insist on its terms and protect its interests. Besides, China has already launched futures on commodities. Contracts on gold and nickel kicked off in 2015. Remarkably, a volume of physical delivery under such contracts exceeds volumes traded under futures contracts on the European and US trading floors.
Nevertheless, the US dollar will be still included in settlements. Foreign participants are allowed to make a payment in a foreign currency at an exchange rate, set by the People’s Bank of China at the date of trading. The US dollar is declared the foreign currency for this purpose.
