China's Crude Futures Launch With 10 Billion Yuan Traded In First Hour

29 March, 2018, 01:53 | Author: Barbara Daniel
  • Shanghai crude oil futures jump more than 6%

The new contract reportedly attracted foreign investors including Glencore and Trafigura, as well as Freepoint Commodities, BOCI Global Commodities and North Petroleum International.

China's yuan-denominated crude oil futures launched today in Shanghai with 15.4 million barrels of crude for delivery in September changing hands over two and a half hours, and over 10 billion yuan traded in the first hour.

Brent volumes have been lower than usual as much of Europe is already on holiday for Easter. Analysts also expected gasoline inventories to have fallen by 2 million barrels and distillate stocks to have declined by 1.9 million barrels.

Despite this, there were concerns over regulatory interference, as seen in other Chinese commodities like iron ore and coal. Still, concerns over American shale oil remain, with analysts forecasting a gain in US crude inventories last week.

It is more of a game changer for the US.

China's desire to open a domestic market to trade futures has grown as the country's crude imports have boomed.

The early involvement of big worldwide traders was a morale boost to the fledging market, but state oil majors like PetroChina and Sinopec are expected to provide a significant amount of liquidity in the long-term.

While both contracts have been gaining, Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois said Brent has outperformed WTI.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said there was "considerable resistance" to extending the deal as current, or higher, prices could entice even more United States shale producers to come back online.

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

USA shipments, which benefited from OPEC supply cuts and rebounding crude oil prices, averaged 153,000 bpd previous year.

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.

In Asia, Shanghai crude futures fell more than 2% in their second day of trading to 424 yuan ($67.85) a barrel from a last settlement of 433.8 yuan ($69.41).

Spot Shanghai crude futures were down 3.75 percent on Wednesday, to 410.4 yuan ($65.37) per barrel by 0700 GMT.

Brent and WTI, in contrast, were down by that time, weighed down by concerns over a looming US trade dispute with China.

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