Shanghai Oil Futures Off To Robust Start On 2nd Day

Shanghai Oil Futures Off To Robust Start On 2nd Day

Shanghai Oil Futures Off To Robust Start On 2nd Day

The long-heralded trading debut of the crude oil futures - the first commodity futures contract that allows foreign traders to participate - comes after China surpassed the United States to become the world's largest crude importer in 2017.

That possibly changed on Monday, as Asia saw the launch of Shanghai crude oil futures. Crude oil is among the most actively traded commodities, with two key benchmarks: West Texas Intermediate, or WTI, which trades on the New York Mercantile Exchange, and Brent crude, which trades on ICE Futures Europe in London.

In 2017, the total traded value of ShFE's steel derivatives contracts was $4.4 trillion from domestic investors. With this, the country, which is also the world's largest buyer of crude oil is trying to gain more control over pricing, challenging European and U.S. benchmarks.

Following the August expiry date and during the calendar month of September, the newly rolled front-month Shanghai futures contract would reflect physical delivery of crude oil in October.

Despite the first-day success, the yuan-denominated trading and a blend of new rules and regulatory burdens could in the long-run hamper sustained take-up on the Shanghai International Energy Exchange (INE), executives at a dozen banks and brokers and experts involved in the launch told Reuters.

About 413 participants joined the bid collection session in the morning, which include state-owned oil companies - Unipec, CNOOC, Sinochem, Northern Petroleum, independent oil companies and refineries Twinace, Shandong Wonfull, and foreign oil trading companies Trafigura, Glencore, and Freepoint, according to local media.

Singapore-based brokerage Phillip Futures said that "surging production levels persist" in the US.

"The China-U.S trade spat could prompt Beijing to push forward with innovation strategy as it puts more focus on the quality of its economy", said Chen Xiaopeng, an analyst with Sealand Securities.

Extent of US-China trade fight depends on Trump's goals
Trade Representative's Office lists U.S. apple exports to China as one of the country's top export success stories", he continued. A deal for the latter will not come in the next 45 days before the yet-to-be published USA tariff list becomes effective.

Lower crude prices have played a part as to why not earlier.

The oil futures with delivery in September began the stock exchange session at a price of 440 CNY per barrel, and by noon almost 15,000 contracts changed their owners.

Over the first 24 hours of its trading, Shanghai's spot crude volumes made up 5% of the global market, versus 23% for Brent and 72% for WTI.

At 9:24 a.m. (0224 GMT) prices were up 3.29 per cent at 430 yuan, with 19,122 lots, equal to 19.1 million barrels of oil, traded.

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

Oil prices rose on Tuesday, pushed up by the concern that tension in the Middle East could lead to supply disruptions.

This comes on the heels of the industry in 2016 finding the fewest barrels in 70 years; the IEA believes that while oil market will remain well supplied through at least 2020; after that, the market might struggle to meet growing demand.

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