China is set to be soon able to trade oil with the use of its own currency by establishing a futures market that is aimed to rival the international benchmark contracts which are exclusively traded in dollars.
On Friday, plans to begin the trade of yuan-based oil futures on the Shanghai Futures Exchange from the 26th of March were confirmed by the China Securities Regulatory Commission.
China is currently the largest crude importer in the world which is understood to be a significant part of its ambition to set a benchmark which reflects the nation’s local market and gives its mega refineries more clout.
The long-held appetite of China for the country’s own crude futures market is extremely controversial in large part since it upends a series of legacy precedents in the market which was always dependent on benchmarks that are based on futures contracts that are traded for the West-Texas Intermediate or Brent crude.
The WTI reflects the trading of crude futures in the United States, which are utilised to determine the price of physical oil sales, while Brent is utilised as the benchmark for Middle Eastern and European producers.
The move of China to establish its presence in the global crude futures trading has also raised some eyebrows since the price of the futures will reflect its own growing oil demand instead of oil production.
The futures are set to be traded on the Shanghai International Energy Exchange.