China yesterday launched its first-ever crude oil futures contract as the world’s biggest oil buyer seeks to wield greater power over pricing and challenge the benchmarks in the US and Europe.
Long-awaited yuan-denominated futures on the Shanghai International Energy Exchange traded at 427.90 yuan a barrel (US$67.78) for September settlement at 2:13pm, with about 18,540 lots changing hands.
The contracts, which are open to foreign investors, end years of delays and setbacks since China’s first attempt to list crude oil futures in 1993.
Photo: Reuters
September contracts of the two major US dollar-based oil benchmarks, Brent in London and West Texas Intermediate in New York, traded near US$68.29 and US$64 a barrel respectively.
China’s desire to open a domestic market to trade futures has grown as the nation’s crude oil imports have boomed.
It last year surpassed the US as the world’s biggest buyer of foreign oil.
The contracts might not only help wrest some control over pricing from the main international benchmarks, but yuan-denominated contracts could also promote the use of its currency in global trade — a key long-term goal for Asia’s biggest economy.
“China has used this contract in an innovative way, to fill the void of a voice representing buyers in Asia,” Shanghai-based ICIS-China analyst Li Li said. “With this launch, the market will pay more attention to China’s demand story.”
Futures for September settlement opened at 440 yuan a barrel, up from a reference price of 416 yuan.
The exchange said that foreign companies, including Glencore PLC and Trafigura Group, participated in the debut via brokers.
Allowing foreign investors to trade the futures directly is a first for China’s commodity markets.
To attract more participation, China plans to waive income taxes for overseas individuals and institutions.
About 19 foreign brokers had registered to trade the contracts as of last week, the exchange 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.
Skeptics argue that hurdles such as capital controls, regulatory risk and market intervention in other Chinese securities have made investors cynical about the prospect of Shanghai futures becoming a regional price-setter.
Similar obstacles have kept foreign investors as bit players in the nation’s giant stock and bond markets.
Meanwhile, crude futures that were tested in Singapore and Japan have since faded to obscurity due to low liquidity.
“It’s hard to see it becoming a major driver of oil prices in the short to medium term,” Australia & New Zealand Banking Group senior commodities strategist Daniel Hynes said. “I still think there is a general reluctance from global investors to trade Chinese-based contracts.”
While he is not particularly watching it closely for the moment, ANZ’s Chinese desk is very focused on it, he said.
Then there are the bulls, such as hedge fund manager Adam Levinson, who says the start of “petro-yuan” would be a “huge story” and increase the use of the Chinese currency in trade settlements.
For China’s regulators, the hope is that the futures would serve as a risk management tool for its oil companies, act as a price reference for industry participants, as well as help open the nation’s financial markets.
With one eye on success, the authorities are also wary of any potential bubbles created by the millions of wealthy retails investors living in the world’s second-largest economy.
Trading in futures, from apples to steel, has exploded across the nation’s three commodity exchanges, prompting regulators to repeatedly step in to quell fears of a bubble.
One way of tempering the froth has been to limit physical delivery space for barrels of oil as well as setting storage costs that are double the rate elsewhere.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy