China, US trade dispute weighs on prices

China, US trade dispute weighs on prices

China, US trade dispute weighs on prices

Trading will resume at 1:30 p.m.

So far, China has opened more than 6,000 trading accounts, including the country's oil majors and about 150 brokerages.

Oil prices fell on Wednesday, with Brent dropping back below $70 per barrel and US West Texas Intermediate crudes dipping below $65, pulled down by a report of increasing US crude inventories that surprised many traders.

U.S. WTI crude futures CLc1 were at $64.73 a barrel by 0611 GMT, down 52 cents, or 0.8 percent, from their previous settlement.

On the first trading day, the 15 listed crude oil contracts changed hands in a total of 42,300 transactions.

Last year, China became the world's biggest buyer of foreign oil, surpassing the U.S. Yuan-denominated contracts are expected to boost the use of yuan in worldwide trade in the long run.

The contracts might not only help wrest some control over pricing from the main worldwide 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. "With this launch, the market will pay more attention to China's demand story".

Within minutes of the launch, the price had gone up to nearly US$70.85 (447 yuan) from a starting price of US$69.94 (440.4 yuan) per barrel. The contract settled at $65.88 Friday (http://www.marketwatch.com/story/oil-tips-higher-on-fresh-sign-for-continued-opec-production-curbs-2018-03-23), which was the highest finish for a front-month contract since January 26, according to FactSet data.

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Citing Li Qiang, director of the research center under the Xinhu Futures, the media outlet suggested that the launch of China's own oil futures could be seen as Beijing's attempt to open the country's commodity market to foreign investors. To attract greater trade participation, Beijing plans to exempt foreign traders and organizations from income tax.

Brent has risen by more than 5 percent this month while WTI is up over 4 percent.

The skeptics say that capital controls, regulatory risks, and state intervention in other Chinese securities have made investors distrustful about the possibility that Shanghai futures will become a regional factor for pricing.

While he's not particularly watching it closely for the moment, ANZ's Chinese desk is very focused on it, he added.

Unipec, trading arm of Asia's largest refiner Sinopec, has inked a deal with a western oil major to buy Middle East crude priced against the Shanghai futures contract, a senior company official said on Monday.

One way of tempering the froth has been to limit physical delivery space for the oil barrels, as well as set storage costs that are double the rate elsewhere.

"The trade war story should be taken into account when trying to quantify the potentially bullish effect of the geopolitical element in oil markets", said analysts at consultancy JBC Energy.

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