China’s yuan-denominated crude-oil futures surged on their long-awaited debut Monday, indicating positive initial sentiment toward the new market, which Beijing hopes will eventually give the country an oil benchmark to rival those in the U.S. and Europe.

The most actively traded futures contract due for delivery in September closed up 3.3% at 429.9 yuan ($68.07) per barrel on the Shanghai International Energy Exchange, after opening up more than 6% from a starting reference point of 416 yuan per barrel. Over 42,000 lots, or more than 21 million barrels, of oil valued at 18.3 billion yuan ($2.9 billion) were traded on Monday, according to data from Wind Information Co.

Beijing has been planning to launch its own oil market for several years, with the aim of providing an oil price that will be more closely aligned to local supply and demand conditions. China is the world’s biggest importer of oil after the U.S., and its fourth-largest producer. The new oil futures traded in Shanghai are open to foreign investors, the first time China has allowed them to trade in its domestic commodities markets in this way.

See: China faces hurdles as it vies with U.S. in oil-futures market

On Monday, Brent crude-oil futures UK:LCOK8 — the global benchmark based in London — were trading at $70.46 per barrel, while West Texas Intermediate futures US:CLK8 , the U.S. version, were trading at $65.68 per barrel.

Despite buoyant initial demand for the Shanghai oil contract, some analysts say the number of restrictions on trading and fears of regulatory intervention in the market could over time limit domestic interest in the market.

Meanwhile, Chinese commodities markets’ reputation for high volatility, and the fact that the contracts are denominated in yuan, not dollars, could damp international investors’ appetite for the futures.

“Trading has been relatively active and smooth so far,” said Gui Chenxi, an analyst at brokerage Citic Futures Co. “It’s a positive step forward, though investors will tread with caution at first as regulators see overall market stability as a desirable goal.”

Gui said it would likely take time for overseas investors to become familiar with the new oil futures, which have been designed in line with existing Chinese contracts. More than 150 Chinese institutions and 19 foreign firms have so far received approval to offer brokerage services to crude-oil futures traders, according to the Shanghai International Energy Exchange.

One issue for overseas investors is how easy it will be for them to take money out of China, given the country’s still relatively strict capital controls.

“As the most influential among all commodities, the crude futures could attract lots of interest from global investors. The question is how can overseas capital flow into China given Beijing hasn’t allowed for full convertibility of its currency,” said Fan Qingtian, a trader at Wuhan-based Changjiang Futures Co.</s>PESCO will not compete with NATO or the US: Polish foreig...</s>US stock futures led global shares higher on Monday after reports that the United States and China have quietly started negotiations to improve US access to Chinese markets eased fears of a trade war between the two economic giants.

[SYDNEY] US stock futures led global shares higher on Monday after reports that the United States and China have quietly started negotiations to improve US access to Chinese markets eased fears of a trade war between the two economic giants.

E-Mini futures for the S&P 500 leaped more than 1 per cent while Japan's Nikkei erased earlier losses of 1.3 per cent to end 0.7 per cent higher.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 per cent, flipping back to positive territory from a 0.5 percent fall.

European shares ticked up on opening, with Germany's Dax, France's Cac and Britain's FTSE all about 0.3 per cent higher.

The Wall Street Journal reported on Sunday that China and the United States have begun behind-the-scenes negotiations to improve American access to the Chinese domestic market.

US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He, a newly appointed vice premier who oversees China's economy.

Signs of talk between the two economic giants allayed fear of an escalating trade war, sparked after US President Donald Trump moved to slap tariffs on Chinese goods, on top of import duties on steel and aluminium, prompting a defiant response from Beijing.

The United States also agreed to exempt South Korea from steel tariffs, imposing instead a quota on steel imports as the two countries renegotiate their trade deal.

"If we do start to hear more favourable news from the US administration and indeed from the Chinese side over the next few trading sessions, then we may see a sharp reversal of the recent moves in the market," said Nick Twidale, chief operating officer at Rakuten Securities Australia.

Still many investors remained cautious given the high level of uncertainty on where any bilateral negotiations may lead."Protectionism remains a source of volatility and downside risk for equities," analysts at JPMorgan said in a note.

"Asia ex-Japan equity outperformance is in part a function of faster growth and capital inflows - both clearly at risk in a trade war."

IN SEARCH OF SAFETY In the uncertain global economic climate, investors looked to pile into the Japanese yen, traditionally a safe haven asset thanks to the country's massive current account surplus.

Speculators added short dollar bets to their portfolios, taking the net short position to its highest in more than a year, according to calculations by Reuters and the Commodity Futures Trading Commission for the week to March 20.

Short yen positions were cut to the smallest since November 2016.

By late Asian trade, the yen had eased slightly from near 16-month highs to 105.08 per US dollar while the Australian and New Zealand dollars, a liquid proxy for China plays, staged a welcome rebound.

The Aussie was up 0.5 per cent while the kiwi gained 0.8 per cent.

The dollar index tracking the greenback against six other major currencies was near a one-month low at 89.423.

In commodities, international Brent crude futures opened above US$70 per barrel for the first time since January but the gains could not be sustained as the ongoing trade disputes weighed on global markets.

Spot gold was flat at US$1,346.8199 an ounce.</s>It’s taken a quarter of a century, but China’s finally getting its own oil futures.

At 9 a.m. local time on Monday, crude contracts will begin trading on the Shanghai International Energy Exchange. The world’s biggest oil buyer is offering yuan-denominated futures that foreigners can buy and sell -- a first in Chinese commodities. Among the most intriguing questions is whether the traditional benchmarks of Brent crude in London and West Texas Intermediate in New York will face a serious challenger. Here are some of the other key questions.

1. Why is this important for China?

Futures trading would wrest some control over pricing from the main international benchmarks, which are based on dollars. Denominating oil contracts in yuan would promote the use of China’s currency in global trade, one of the country’s key long-term goals. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts.

The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world’s biggest crude importer. The Asian nation’s purchases reached a record high in January.

Lower crude prices have played a part as to why not earlier. Chinese oil futures were proposed in 2012 following spikes above $100 a barrel, but prices in 2017 have averaged little more than $50. There’s also concern over volatility. China introduced domestic crude futures in 1993, only to stop a year later because of volatility. In recent years, it repeatedly delayed its new contract amid turmoil in equities and financial markets. Such destabilizing moves have often prompted China’s government to intervene in markets in one way or another.

Futures contracts fix prices today for delivery at a later date. Consumers use them to protect against higher prices down the line; speculators use them to bet on where prices are headed. In 2017, oil futures contracts in New York and London outstripped physical trading by a factor of 23. Crude oil is among the most actively traded commodities, with two key benchmarks: West Texas Intermediate, or WTI, which trades on the New York Mercantile Exchange, and Brent crude, which trades on ICE Futures Europe in London.

Trading hours will be 9 a.m.-11:30 a.m. and 1:30 p.m.-3 p.m. local time and, at night, 9 p.m.-2:30 a.m. The daily trading band has been set at 5 percent on either side, and 10 percent on its debut day, while margin requirements are at 7 percent. Seven grades will be deliverable, including Dubai crude, Basrah Light and China’s Shengli. The contracts will have 36 delivery months with the first 12 months as rolling contracts. The daily cost to store crude for delivery into the Shanghai exchange is set at 0.2 yuan a barrel, or at least twice the rate elsewhere, in a move seen as deterring excessive price swings.

Nickel was the last major commodity to be listed there in 2015; within six weeks, trading in Shanghai surpassed benchmark futures on the London Metal Exchange, or LME. In China, speculators play a far greater role, boosting trading volumes but making markets susceptible to volatility. In early 2016, the then-head of the LME said it was possible some Chinese traders did not even know what they were trading as investors piled into everything from steel reinforcement bars to iron ore. Steep price rises relented when China intervened with tighter trading rules, higher fees and shorter trading hours.

That remains to be seen. Overseas oil producers and traders would need to swallow not just China’s penchant for occasional market interventions but also its capital controls. Restrictions on moving money in and out of the country have been tightened in the past two years after a shock devaluation of the yuan in 2015 prompted a surge in money leaving the mainland. Similar hurdles have kept foreign investors as bit players in China’s giant stock and bond markets. As of March 21, a total of 19 overseas brokers have registered with the Shanghai exchange for dealing the oil futures contract.

8. Could the yuan challenge the dollar’s dominance in oil?

Not any time soon, since paying for oil in dollars is an entrenched practice, according to some analysts. Shady Shaher, head of macro strategy at Dubai-based lender Emirates NBD PJSC, says it makes sense in the long run to look at transactions in yuan because China is a key market, but it will take years. Bloomberg Gadfly columnist David Fickling argues that China doesn’t have “nearly the influence in the oil market needed to carry out such a coup.” On the other hand, paying in yuan for oil could become part of President Xi Jinping’s “One Belt, One Road” initiative to develop ties across Eurasia, including the Middle East. Chinese participation in Saudi Aramco’s planned initial public offering could help sway Saudi opinion toward accepting yuan, which is used in only about 2 percent of global payments.
• All traders want for Christmas is Chinese oil futures.
• David Millhouse, head of China research and strategy at Forsyth Barr, argues oil futures could pave the way for removing capital controls.
• Gadfly’s David Fickling sees no danger for the petro-dollar.
• QuickTakes on the Silk Road and China’s capital controls.

— With assistance by Dan Murtaugh, Serene Cheong, and Sarah Chen</s>But analysts said the long-delayed Shanghai-traded futures are unlikely to challenge the primacy of New York and London-based futures any time soon due to Chinese capital controls and the entrenched position of the dollar-denominated contracts. 



 Futures contracts allow investors to hedge exposure to physical prices, and offering them in yuan could allow energy-hungry China -- which last year surpassed the United States as the world's largest crude importer -- to exercise more control over prices of the type of oil it consumes most. 



 It also is the latest in a series of steps by China to raise the world profile of the yuan. 



 The new contracts are "rooted in China's ambition to increase its bargaining power to price energy supplies amidst an increasing reliance on oil imports," energy industry information provider ICIS said in a research note.

"If the demand for (yuan contracts) came at the expense of the US dollar, there is always a chance, however slim, that the Chinese yuan could displace the US dollar as the main petro-currency." 



 But analysts said Chinese capital controls will likely discourage hefty foreign engagement, as will wariness of the often wild gyrations in China's still relatively immature financial markets.</s>China's first ever crude-futures contract has been launched, as the country seeks to have a greater say over pricing and challenge benchmarks in Europe and the U.S., Bloomberg reported Monday.

According to the report, the yuan-denominated futures traded at $68.47 per barrel for September settlement by 11:30 a.m. local time Monday.

Moreover, the Chinese contract traded about $4 a barrel higher than West Texas Intermediate (WTI), the report said.

Last year, China became the world's biggest buyer of foreign oil, surpassing the U.S. Yuan-denominated contracts are expected to boost the use of yuan in international trade in the long run.</s>New Delhi: China launched its first ever yuan-denominated oil futures contract in Shanghai on Monday, marking the first time foreign investors will have access to Chinese commodity futures as the world`s top crude importer seeks greater influence over global prices.

Shanghai crude oil futures opened up more than 6 percent with almost 20 million barrels of the most-active September contract changing hands in the first 25 minutes as China debuted its oil benchmark.

The launch of China’s yuan-denominated oil futures marked the culmination of a decade-long push by the Shanghai Futures Exchange (ShFE) aimed at giving the world’s largest energy consumer more power in pricing crude sold to Asia.

The current global standards are London-trade Brent futures, and West Texas Intermediate (WTI), which is traded in New York.

They mainly trade higher-quality light sweet crude oil, while the yuan contracts on the Shanghai International Energy Exchange involve mainly medium-sour crude.

It also is the latest in a series of steps by China to raise the world profile of the yuan.

The most-active September contract opened at 440.4 yuan per barrel from a reference point of 416 yuan, and jumped to as high as 447.1 yuan in the first few minutes.

At 9:24 a.m. (0224 GMT) prices were up 3.29 percent at 430 yuan, with 19,122 lots, equal to 19.1 million barrels of oil, traded.</s>China, the world’s largest oil importer, is launching a yuan-denominated crude futures contract with the potential to become a benchmark for global oil transactions. But it must overcome many challenges to earn a place alongside the internationally recognized U.S. dollar-denominated contracts.

Tim Seymour, managing partner of Seymour Asset Management, notes that because the contract covers a product handled in the Shanghai Free Trade Zone, this will be the first time non-Chinese can trade in Chinese commodity markets. The trade zone, launched in 2013, is open to foreigners and lets goods and capital flow freely without import duties.

This “will begin to create a 24-hour market for trading oil, especially where some of the largest buyers of oil are located,” Seymour says.

The crude-oil futures began changing hands on March 26 on China’s Shanghai International Energy Exchange. They will be traded in the Chinese currency, in a market that’s ruled by the greenback-denominated West Texas Intermediate, the U.S. benchmark CLK8, -0.43% , and Brent crude LCOK8, -0.20% , its global equivalent.

“China is the largest net buyer of oil and [other petroleum] products,” says Seymour, and is intent on securing enough energy for its needs.

In 2017, China imported 8.4 million barrels of oil a day, versus 7.9 million for the U.S., according to the Energy Information Administration. China wants its importance as the top importer “reflected in its stature in the world,” says Matt Badiali, senior analyst at Banyan Hill.

“What better way to do that than to supplant the U.S. dollar with the yuan?” asks Badiali.

He believes that oil futures traded in China will “become a global benchmark, based on the crude basket that will be offered, and the power of China’s economy.” They will “directly challenge WTI and Brent.”

This year, WTI oil futures have climbed around 9%, while Brent has tacked on more than 5%.

Seven grades of crude will be accepted for delivery under the Chinese futures contract, including Basrah Light, a Middle Eastern high-sulfur “sour” oil. China is the biggest buyer of Basrah Light, with 618,000 barrels a day delivered in 2017, with the second and third purchasers being India and the U.S., according to Matt Smith, director of commodity research at ClipperData.

“The competition with the U.S. for Basrah Light is most likely the most interesting aspect of this new futures contract,” notes Smith.

Check out: Who gets hurt in a trade war? Mostly not China

The contract has “been in the works for over half a decade, and although it may be off to a modest start, the ultimate goal is to create a yuan-denominated global crude benchmark,” he continues. “Given this underlying ambition, we should not be dismissive of it growing in prominence to be a leading benchmark over the coming decade.”

Banyan Hill’s Badiali says the fact that these contracts are “signed up to be delivered in yuan is important. … That means China has a major inroad into oil deals in the Middle East.” It also marks a bid to “strengthen the yuan in the eyes of the world,” he maintains.

But being traded in yuan also puts the futures at a big disadvantage: They will have limited liquidity.

The vast majority of traders “have little incentive to trade the contract, given the contract specifications, most importantly the [yuan] currency, as [the U.S. dollar] is the global standard for oil trading,” says Michael Corley, president of Mercatus Energy Advisors.

“It will be quite a challenge for the contract to even become a regional benchmark, let alone a global benchmark,” he adds. The main interest will come from Chinese refiners, he observes, but “it simply isn’t an attractive contract to most global market participants.”

Trading in West Texas Intermediate on the New York Mercantile Exchange averages roughly 1.4 million contracts a day, while daily volume is just shy of one million for Brent on the ICE Futures Europe exchange, he says. He doesn’t expect the Chinese contract to soon steal much, if any, volume from either, as “they are simply too well-established, globally acceptable benchmarks.”

Still, Corley adds, given that China is one of the world’s largest oil consumers, if the contract succeeds, that would “indeed provide China with more pricing power, much to the dismay of their primary suppliers, the Middle East producers.”

This report also appears at Barrons.com.</s>[SEOUL] China launched its first ever crude-futures contract as the world's biggest oil buyer seeks to wield greater power over pricing and challenge benchmarks in the US and Europe.

The long-awaited yuan-denominated futures on the Shanghai International Energy Exchange traded at 440.20 yuan a barrel (S$91.74) at 9.01am local time. The contracts, which are open to foreign investors, end years of delays and setbacks since China's first attempt to list the securities in 1993.

The two major dollar-based oil benchmarks, Brent in London and West Texas Intermediate in New York, traded near US$70.95 a barrel and US$66.42 a barrel, respectively.</s>Futures in Shanghai are about $3/barrel higher than WTI crude

China launched its first ever crude-futures contract as the world’s biggest oil buyer seeks to wield greater power over pricing and challenge benchmarks in the U.S. and Europe.

The long-awaited yuan-denominated futures on the Shanghai International Energy Exchange traded at 440.20 yuan a barrel ($69.70) at 9:01 a.m. local time. The contracts, which are open to foreign investors, end years of delays and setbacks since China’s first attempt to list the securities in 1993. The two major dollar-based oil benchmarks, Brent in London and West Texas Intermediate in New York, traded near $70.95 a barrel and $66.42 a barrel, respectively.

— With assistance by Sarah Chen, and Heesu Lee
China launches an oil futures market, with contracts denominated in yuan, in a bid to compete with oil benchmarks from the United States and Europe.