The launch of yuan-denominated Shanghai futures in March has created a lot of enthusiasm among international companies seeking to tap China’s bustling commodity markets.
The new futures contract traded on the Shanghai International Energy Exchange is now on course to become an alternative international oil benchmark not priced in dollars.
Glencore, Trafigura, and Freepoint Commodities were among the first to buy the new contract, but more importantly Shanghai crude oil futures have seen a steady pick-up in daily trading since launching.
The launch is yet another attempt by China to wield economic influence, and Beijing hopes the Shanghai contract will eventually rival international benchmarks Brent and WTI.
For major oil producers like Iran and Russia which are under US and European sanctions, the new contract provides an alternative platform to market their cargoes.
China is the world’s biggest importer of crude oil and also the biggest buyer of Iranian oil, with the recent boost in Shanghai futures partially attributed to the sanctions decision. “The sanctions can potentially accelerate this process of establishing a 3rd oil benchmark,” Reuters said, citing a senior vice president for derivatives in Singapore.