China will soon be able to trade oil using its own currency by creating a futures market to rival the international benchmark contracts which are traded exclusively in dollars.
The China Securities Regulatory Commission confirmed its plans to begin the trade of yuan-based oil futures on the Shanghai Futures Exchange from March 26 on Friday.
China is now the world’s largest crude importer which is understood to be a large part of its drive to establish a benchmark which reflects its local market and offers its mega refineries more clout.
China’s long-held appetite for its own crude futures market is highly controversial in large part because it upends a raft of legacy precedents in the market which has always relied on benchmarks based on futures contracts traded for Brent crude or the West-Texas Intermediate.
The WTI reflects trading of US crude futures, which are used to determine the price of physical oil sales, while Brent is used as the benchmark for European and Middle Eastern producers.
China’s move to establish its presence in global crude futures trading has also raised eyebrows because the futures price will reflect its own growing oil demand rather than oil production.
The futures will be traded on the Shanghai International Energy Exchange