Shanghai Crude Oil Futures To Give Asian Buyers Room For More Arbitrage


Shanghai Crude Oil Futures To Give Asian Buyers Room For More Arbitrage

China’s launch of Yuan-denominated oil future contracts — the first of its kind for Asian markets – will give Asian buyers more room for arbitrage and will increase China’s bargaining power to price energy supplies. The launch of the oil futures exchange is fuelling speculations of its impact on international benchmarks like London-based Brent Crude and New York based West Texas Intermediate.

China replaced the United States as the largest importer of crude oil last year. The International Energy Agency says global oil demand, which grew at double the rate in 2017 as compared to the last decade, was primarily on growth in demand from Asia, with China and India being the biggest demand centres.

“Asian buyers of crude have always been having a grouse that suppliers factor in a premium while selling crude to the region as opposed to supply to Americas and Europe. If the Chinese trading volumes and liquidity improve significantly, that will set a benchmark for oil pricing in future, albeit not in the near term,” K Ravichandran, Senior Vice President & Group Head, Corporate Ratings at ICRA said. Read More…

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