China launches crude oil futures trading — China Focus

China launches crude oil futures trading — China Focus

Brent crude futures traded at $70.23 per barrel, while the West Texas Intermediate (WTI) crude futures traded at $65.63.

Financial oil markets have always been dominated by Europe's Brent and America's WTI.

"Whether this will have any real bearing on the other crude benchmarks, I'm not quite sure, but traders love a new toy, so I applaud China for bringing in something that could stoke up some volatility", said Matt Stanley, a fuel broker with Freight Investor Services (FIS) in Dubai. Our short-term outlook and medium-term outlook on crude oil is bullish.

U.S. President Donald Trump last week signed a memorandum that could impose tariffs on up to $60 billion of imports from China.

"The fact that the government is encouraging the exchange and also is not shy about stepping in to occasionally change the rules may discourage worldwide players", Brown said.

Although the exchange will have an overnight trading session to match late European and early US trading, it will close for more than six hours before trade resumes in Beijing.

It a year ago surpassed the United States as the world's biggest buyer of foreign oil.

The futures changed hands in the first 25 minutes as China debuted its oil benchmark.

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For China's regulators, the hope is that the futures will serve as a risk management tool for its oil companies, act as a price reference for industry participants, as well as help open the country's financial markets.

Speculative retail and institutional investors also propped up the launch-day's liquidity, said Chen Tong, Shanghai-based senior crude analyst at First Futures.

Within minutes of the launch, the price had gone up to nearly US$70.85 (447 yuan) from a starting price of US$69.94 (440.4 yuan) per barrel. Brent crude futures were at $69.65 per barrel, down 46 cents, or 0.7 per cent. Trading in futures from apple to steel has exploded in recent years across the nation's three commodity exchanges, prompting regulators to repeatedly step in to quell fears of a bubble.

At 0316 GMT, Shanghai's September contract was down 1.43 percent at 427.6 yuan ($68.33) per barrel.

"We continue to call on all parties, including the Houthis, to return to political negotiations and move toward ending the war in Yemen", she said in a statement.

Long-awaited yuan-denominated futures on the Shanghai International Energy Exchange traded at 427.90 yuan a barrel (US$67.78) for September settlement at 2:13pm, with about 18,540 lots changing hands.

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