Chinese oil futures contracts denominated in yuan is expected to significantly boost China’s leverage to demand crude imports be priced in yuan. It would also increase the use of the Chinese national currency in global financial trade, challenging the greenback.
China, the world’s top oil importer, started its long-anticipated crude oil futures contract that is priced in yuan and convertible into gold.
The contract attracted nearly 27 billion yuan ($4 billion) during the first trading session. The step was aimed at diminishing the role of the US dollar in oil trading, strengthening the national currency and at bypassing US sanctions by trading oil in yuan.
China is expected to become a chief beneficiary of the US unilateral sanctions against the world’s biggest energy producers, including Russia, Iran and Venezuela. The Petro-Yuan would save China the cost of exchanging dollars, the main global currency used in oil trade.
The delivery, the volume, and smooth process will be key to China fulfilling its ambition to have the yuan-priced oil futures contract become a major crude benchmark on a global scale like the Brent and Western Texas Intermediate (WTI) benchmarks.
In the first physical settlement of the Chinese yuan-denominated oil futures contract, five companies will deliver a total of 600,000 barrels of Middle Eastern crude grades to buyers of the September futures contract.
Unipec, the trading unit of Asia’s biggest refiner Sinopec, plans to deliver some 200,000 barrels of Iraqi grade Basra Light to Sinopec-held storage tanks at an island off the eastern province of Zhejiang.
In 2016, the Chinese yuan was included in the Special Drawing Right (SDR) basket alongside the US dollar, the Japanese yen, the Euro, and the British pound. The move granted yuan the status of a reserve currency.
RT.com / ABC Flash Point Oil News 2018.
This step will annihilate the US dollar?