China Launches Oil Futures

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

In Asia, Shanghai crude futures ISCU8 fell over 2 percent in their second day of trading to 424 yuan ($67.85) per barrel from a last settlement of 433.8 yuan ($69.41).

WTI futures listed on an exchange in NY and Brent Crude futures listed on a London exchange are worldwide benchmarks.

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.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said there was "considerable resistance" to extending the deal as current, or higher, prices could entice even more US shale producers to come back online. Both futures contracts are commonly used by financial traders. 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.

That concern did not scare off global commodity trading giant Glencore, which according to Chinese brokerage Xinhu Futures carried out the first trade on the Shanghai crude oil futures.

Shanghai Crude aims to rival the world's two crude benchmarks, luring overseas traders with the promise of a deep pool of liquidity and the chance for arbitrage between Asian, U.S. and European markets.

Despite this, there were concerns over regulatory interference, as seen in other Chinese commodities like iron ore and coal. Thus, the contracts may not only help to win some control over pricing from the major worldwide benchmarks, but also promote the use of Chinese currency in global trade.

US West Texas Intermediate (WTI) crude futures were at US$66.06 (RM258.50) a barrel at 0157 GMT, up 18 cents, or 0.2 per cent, from their previous close. This would decrease demand for the greenback and boost US inflation.

"The rules around trading methodology will be unfamiliar for western houses", said John Browning, chief operating officer of Hong Kong-based futures broker Bands Financial Ltd, which is an approved overseas intermediary for the INE.

Futures for September settlement opened at 440 yuan a barrel, up from a reference price of 416 yuan.

A number of analysts have warned that the 13 per cent rally since the start of 2018 could peter out in the short term due to global refinery maintenance, which could limit crude demand and rising North American production.