China Focus: China launches crude oil futures trading

China Focus: China launches crude oil futures trading

Brent crude futures traded at $70.23 per barrel, while the West Texas Intermediate (WTI) crude futures traded at $65.63.

While the risk from geopolitics has begun to ease, oil markets were still seeing influence from the wider financial markets, sources said.

While the nation hopes to establish a benchmark for global oil transactions, whether the Asian nation would achieve that goal has been the subject of hot debate. "Refinery maintenance is in full swing", causing "big builds in crude-oil stocks and big draws in products", he said. While global stockpiles are tightening in a sign that the Organization of the Petroleum Exporting Countries and its allies' production cuts are working, fears still remain that surging US production could thwart those efforts.

"The fact that the government is encouraging the exchange and also is not shy about stepping in to occasionally change the rules may discourage worldwide players", Brown said.

It is more of a game changer for the US.

Ren Wei of South China Morning Post highlighted that China's recent move became possible due to the fact that the country had emerged as the largest oil importer in 2017, surpassing the United States.

Straits said it brokered the first trade for Glencore and cleared the deal through Xinhu Futures.

Brent crude oil dropped below the key $70 a barrel level today after a shock rise in U.S. crude stockpiles.

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"First-day trading of new contracts was expected to be active, but it was just a first step for China to gain pricing power", said Huang Lei, an independent commodity futures market analyst.

Reports the USA was considering a crackdown on Chinese investment also sent stocks tumbling, stoking trade war fears again, sources said.

Speculative retail and institutional investors drove much of the launch-day's liquidity, said Chen Tong, Shanghai-based senior crude analyst at First Futures.

In dollar-terms, that puts Chinese crude prices significantly below Brent and only slightly above US WTI.

The price of SC1809 contracts started at 440 yuan per barrel and closed at 429.9 yuan per barrel, which is 3.34 percent higher than the benchmark price. It traded at $64.69 a barrel, down 86 cents, as of 4:42 p.m. EDT (2042 GMT).

In China, yuan-denominated oil futures declined 1.4 percent to end at 424 yuan a barrel on Tuesday. This is especially important amid the ongoing tariff war between the U.S. and China.

Chinese exchanges count each side of a trade - the buy and the sell - as two lots, meaning the total oil changing hands was 20,328 lots, equal to 20.3 million barrels.

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