After the listing of RMB crude oil in March this year, the volume of trading continued to rise. In September, oil and gas giants including PetroChina and Sinopec participated in the first delivery of the contract.
Reuters energy analyst Henning Gloystein wrote on August 31 that the presence of renminbi crude oil is rising and threatening the market position of New York oil and Brent oil.
According to the article, the presence of RMB crude oil futures (ISCC1), which the Shanghai Futures Exchange (SHFE) began trading in March, continued to rise in the international market. Although this variety has become an indicator for Asian countries, China, as the world’s largest crude oil importer, will continue to promote the trading of RMB crude oil in the future, British North Sea Brent Oil (OIL) and New York West Texas Intermediate Crude Oil (WTI). The market position will therefore be shaken.
At the beginning of the trading of RMB crude oil in the previous period, the trading volume exceeded the other futures varieties such as Oman crude oil (the third in the world) that began trading in 2007, occupying the market share of the original Brent oil and New York oil. In July, the total transaction volume increased to 2.8 million hands (1 lot 1,000 barrels), reaching 14.4% of global trading volume.
The article said that the “crust change” of this crude oil futures market will also affect other markets such as foreign exchange.
Richard Innis, head of the Internet currency trading company Oanda Asia Pacific, predicted that “taking into account the prominent situation in China’s oil market, the share of Shanghai oil is expected to increase further.” In addition, the foreign exchange market is also “focusing on the renminbi.”
Zhang Huiyao of Huatai Futures said, “Shanghai crude oil has a higher price and better liquidity, and it has a rapid linkage with other foreign crude oil futures. For speculators, it has become a very good trading variety.”
Considering that China is the world’s largest importer of crude oil, more and more analysts believe that Shanghai Oil will be an important reference indicator. At the same time, the US sanctions against Iran are also one of the reasons for the rapid rise in the significance of its indicators.
As the US government decided in May to impose sanctions on Iran again, it threatened to reduce Iranian crude oil exports to zero as of November 3. All foreign companies and governments that continue to purchase will be sanctioned by the US. China is the biggest buyer of Iranian crude oil and is not expected to ignore the US request.
China has changed part of its crude oil futures trading from the price of the dollar to the yuan.
Innis said, “The continued trading of Iranian crude oil linked to the renminbi on the Shanghai Futures Exchange is expected to be one of China’s current trade frictions.”
He also said that Russia is also interested in clearing crude oil in RMB.
Therefore, Shanghai oil may eventually change the pattern of the world crude oil market.
Barry White of the US international asset holding company (INTL FCStone) said that China’s major oil companies have replaced some of their futures positions with Shanghai crude oil. Shanghai crude oil futures contract was first delivered in September, and giants such as PetroChina and Sinopec participated in it.
According to industry insiders, many companies and banks in the West are also trying to trade Shanghai crude oil futures and plan to expand the transaction volume. Although the Oman crude oil of the Dubai Exchange of the United Arab Emirates has achieved certain success, its influence in the financial market is limited.
The pricing power of the international crude oil market has been dominated by Brent oil and New York oil for decades, which has undoubtedly made China’s promotion of RMB crude oil trading more natural.
Innis said: “As China’s domestic market increases openness and transparency, and the internationalization of the RMB accelerates, Shanghai Oil has begun to take a big step toward this trend.”