China will start trading oil futures in yuan on the Shanghai stock exchange since 26 March, and foreign investors will be able to access the commodities market in the country, announced on Friday the Chinese Commission on regulation of securities market (CSRC).
On completion of this contract, China took 25 years — the first attempt was made in the domestic market in 1993, but was unsuccessful and one year later prekratilis trades due to high volatility, reports Bloomberg.
The "nefteyuani" may be one of the most important events in the oil and currency markets. If foreign investors take new futures and will include them in the number of benchmarks of global oil market in addition to Brent and WTI, China can expect significant growth in the role of the yuan in global trade and economy. The most optimistic experts say that with time the Chinese currency will be able to oust the dollar thanks to such contracts and the total power of the PRC economy.
Skeptics argue that it will not happen until the government of China controls the yuan. So even if international traders agree on the bidding and the calculations in yuan, considered the world price of oil they will continue in dollars.
In 2017, China surpassed USA and became the largest importer of oil in the world — volume of purchases was about of 8.43 million barrels a day amid high demand and the ongoing formation of a strategic reserve.
Bidding will be held on the Shanghai international energy exchange division of the Shanghai futures exchange. The contract will receive the abbreviation INE. The lot size will be 1 thousand barrels, minimum bid increase 0.1 yuan per barrel.
When in 2015 in Shanghai appeared futures for Nickel, the volume of trading with them for six weeks exceeded the reference operation with the Nickel on the London metal exchange (LME). However, in China, the role of speculative players is higher than in London or new York,therefore, all commodity contracts are more volatile, says Bloomberg.
Initially, price fluctuations of oil futures in yuan will be limited to a fairly narrow corridor — 4% in any direction with the closing price at the end of the previous trading session.
Technical specifications very similar to the description of a contract for Russian oil Urals. Chinese futures assumes sulphur content of 1.5% by weight and a density of 32.0 degrees API.
Bidding will be held from 9:00 to 11:30 and 13:30 to 15:00 PM Beijing time (4:00-6:30 8:30-10:00 GMT).
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