Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content
  • CRYPTO REWARDS!

    Full endorsement on this opportunity - but it's limited, so get in while you can!

"It's A Huge Story": China Launching "Petroyuan" In Two Months


Recommended Posts

China plans to issue oil contracts on 26 March
 
China has announced it will launch future oil contracts on March 26, a long-awaited move that will compete heavily with dollar-denominated crude
 
Zhang Daping, spokesman for the China Securities Regulatory Commission, told a news conference on Friday.
 
According to press reports yesterday, the final preparations for the release of crude oil futures in Chinese currency are now under way on the Shanghai International Energy Exchange.
 
"After five tests of the system last year, the trading platform faced a minor imbalance, but these issues will be addressed," said Tang Jun, vice president of the China Exchange.
 
The Chinese government aims to internationalize the yuan and carry out trade operations through its own currency, after being approved as the special drawing rights (SDR) currency of the International Monetary Fund (IMF).
 
By 10:30 am GMT, the benchmark Brent crude was down 0.5 percent at $ 64.49 a barrel.
 
  • Upvote 2
Link to comment
Share on other sites

 

FEBRUARY 9, 2018 / 12:32 AM / UPDATED 2 HOURS AGO

China plans to launch crude oil futures on March 26: securities regulator

 

4 MIN READ

  •  
  •  
 

BEIJING (Reuters) - China plans to launch its long-awaited crude oil futures contract on March 26, the country’s securities regulator said on Friday, a move that could potentially shake up pricing of the world’s largest commodity market.

 

Chang Depeng, a spokesman for the China Securities Regulatory Commission (CSRC), gave the launch date at a regular briefing in Beijing, confirming what two sources familiar with the situation told Reuters earlier on Friday.

The launch will mark the culmination of a years-long push by China to create Asia’s first oil futures benchmark, and is aimed at giving the world’s biggest oil importer more clout in pricing crude sold to Asia.

It will potentially give the Shanghai International Energy Exchange (INE), which will operate the new contract, a share of the trillions of dollars each year in oil futures trading.

The Shanghai Futures Exchange (ShFE) and INE, which is part of the ShFE, declined to comment.

Asia has become the world’s biggest oil consuming region, and China hopes its own derivative crude contract will better reflect market conditions in the region.

The two most active oil futures contracts in the world are the West Texas Intermediate (WTI) CLc1 contract offered by the New York Mercantile Exchange (NYMEX), owned by CME Group (CME.O), and the Brent LCOc1 contract offered by the Intercontinental Exchange (ICE.N) from London.

WTI futures are an important component of physical oil prices in the Americas, while Brent plays a vital role for prices for Middle Eastern, European and Asian crude.

Most physical oil trades globally are hedged using those two crude derivatives.

CME.ONASDAQ
--(--%)
CME.O

The creation of the yuan-denominated contract, which will be open to Chinese and overseas investors, was originally expected about six years ago, but has run into delays as turmoil in China’s stock markets and other commodity futures raised concerns about its capacity to handle financial turbulence.

The proposal was put on the backburner early last year. Potential international participants worried they would not be able to freely exchange the yuan because of a Chinese clampdown on capital outflows, and were concerned at Beijing’s heavy handed intervention in its commodity markets.

John Browning, chief operating officer of Hong Kong-based futures broker Bands Financial Ltd, which has been approved by the CSRC as an overseas intermediary for the INE, said international participation in the contract was crucial to ensure INE pricing truly reflects global trade flows.

“The principal driver for the choice of this contract is to enable China to develop its own benchmark for oil pricing while increasing the trade of renminbi-denominated oil,” Browning said in a statement, using another name for the Chinese currency.

But while the contract will be quoted in yuan, “the exchange will accept USD as collateral for initial margin,” opening the way for participation by non-Chinese companies, he added.

 

https://www.reuters.com/article/us-china-oil-futures/china-plans-to-launch-crude-oil-futures-on-march-26-securities-regulator-idUSKBN1FT0P2

  • Thanks 3
  • Upvote 1
Link to comment
Share on other sites

  • 3 weeks later...

Petro yuan

FEBRUARY 24, 2018 BY SAAD AWAN
PetroYuan.png
  • And war economics

China in preparing to launch yuan-denominated oils futures contracts. According to some news agencies it may be allowing yuan-based oil contracts in Shanghai Stock Exchange as early as March this year. The move has consequences going far beyond the economic domain. Hitherto, the US dollar has had the monopoly over oil contracts as it enjoyed the status of the only currency in which major oil contracts could be made. This meant that US could get away by having a 20 thousand billion dollars budget deficit as it could print the dollars backed by “black gold”. What does it mean to challenge America by competing against the ultimate economic tool, the petro-dollar?

As the prospect of petro-yuan becomes a reality, China will, in effect, be making a claim to global oil reserves. That would definitely be against American interests as the “black gold” has been practically backing the US dollar as well as humungous US debt. Globally, if you needed oil you definitely needed to have dollar reserves. These dollar reserves could never be materialised unless goods and services made it to American economy or in some cases through expats sending foreign exchange to their home nations. Most global dollar reserves depend on export from dollar starved nations to American consumers. These reserves would always land back in American economy through the banking system. Again, the same dollar would have to be competed for globally by offering goods and services to American consumer as the world is in perpetual need of oil for most of its energy needs. That means that all the economies have to be constantly running for dollar while the US could print at ease in the name of national and foreign debt.

China sits in a comfortable position as it owns almost 1,200 billion dollars of American debt. It, therefore, does not have to fret about launching the petro-yuan, as, at-least in its initial stages, practically the petro-yuan will itself be backed by the American debt owned by China. On the other hand, Russia has been ever more willing to back the idea of global trade independent of the dollar. Also, the initiative of BRICS alliance already targeted the dollar-heavy world of trade and economics. While Russia and China have stepped up their alliance to a level where the Russian ruble is an acceptable tender at many places in China, many other countries sitting on oil reserves are naturally averse of petro-dollar. Among these nations Iran and Venezuela are those who have to constantly battle sanctions hurled at them from the cross-Atlantic “moral” police. These sanctions limit the trade potential of these oil rich nations. As a result these countries face constant currency depreciation while an America whose extravagance far exceeds its inland oil output and depends on global oil reserves for its huge debt has got its currency-power dictating sanctions on these countries. Both Iran and Venezuela could have a great economic outlook had it not been for the petro-dollar and the power of hindering other nations’ claim to their own resources it has bestowed upon US. While Iran and Venezuela don’t enjoy the independence to live within their own “means”, America reserves the right to live beyond its while putting the burden of its lavish spending on global economy courtesy petro-dollar.

To delay or halt its economic death, America has every reason to trigger a war in Syria, for example, whose oil industry was well penetrated by Russia before American backed militants stepped in to essentially protect the American lust for oil

Therefore, Iran and Venezuela shall be happy participants in petro-yuan’s success and shall also have an opportunity to avoid the oppressive sanctions they are subjected to banning on them their own natural wealth. Would this practically mean putting a stop to American economic tyranny? Has the petro-dollar been potentially checkmated? We are far from that I believe. If the dragon is “sanctioned” from the tool that has propped up its belly, at the expense of others’ appetite, it may leash out brute force against the competition. Since petro-dollar is not a moral tool in global economic competition, we don’t expect it to be defended and protected in a moral way. To delay or halt its economic death, America has every reason to trigger a war in Syria, for example, whose oil industry was well penetrated by Russia before American backed militants stepped in to essentially protect the American lust for oil. This western agenda has been pushed so explicitly that while Bashar-al-Assad had to face the European Union import ban on oil and petroleum products in September 2011, in April 2013 the same European Union would decide that member states could support the Syrian opposition by buying oil from militant controlled areas; Hence, the birth of petro-terrorists to protect the petro-dollar. If that is the depth of immorality that Europe and America can go to protect their oppressive economic hold on the world it would take more than petro-yuan to thwart their malicious agenda. When it comes to the “black gold”, western bloc will be ready to engage any power by attacking its global interests be it through a false flag operation through ISIS and a “reaction” thereafter, or by pushing North-Korea or Syria against the wall.

https://www.pakistantoday.com.pk/2018/02/24/petro-yuan/

 

  • Upvote 1
Link to comment
Share on other sites

Fight for global oil market

Oil Pipes

 Oil Pipes In 2010, China used to import a little less than 4 million barrels of crude oil a day which is now touching over 9.5 million barrels per day , Reuters

 

SHARE

  •  
  •  
  •  
  •  
  •  
  •  
  •  

WRITTEN BY

Updated: Feb 25, 2018, 08:05 AM IST

Till 1974, the reputation of United States Dollar as a global currency was not so established. It was considered at par with Japanese Yen and Pound Sterling. However, an oil pact between Saudi Arabia and the US changed the entire scenario and made US Dollar the most dominating world currency as on date.

Today, out of over 700 billion Dollar of global oil trade, more than 95 per cent happens in US Dollar and every country desirous of buying oil from its producers, such as ex-Russian Federation countries, Middle East or Latin America must first accumulate its dollars. 

China has strong reasons to start this initiative as they import over 18 per cent of the world oil and, in the last one decade itself, their crude oil requirements have risen by more than 235 per cent. In 2010, China used to import little less than 4 million barrels of crude oil a day which is now touching over 9.5 million barrels per day, currently the highest in the world. This trend is likely to continue as China is primarily a manufacturing-based economy and crude oil is an essential item for them.

As per recent reports, China is planning to cover its future oil contracts under “Shanghai International Energy Exchange Program” and going to launch it on March 26, 2018. The “Shanghai International Energy Exchange Program” is named by its acronym INE and will include seven kinds of global crude oils. These are primarily from the Middle East and almost all Chinese companies are expected to use INE for their purchase of oil from that region. 

It will help Chinese buyers to lock the future oil prices and pay in their local currency, giving an answer to Uncle Sam by pitching of Petro-Yuan against Petro-Dollar. The most important part of the Chinese strategy is that they have located this “Shanghai International Energy Exchange Program” in their Free Trade Zone which will facilitate foreign traders also to invest. 

It did not come suddenly but China had been preparing for it for long. Recently, some of the global economies decided to keep Chinese Yuan in their foreign currency stockpile after IMF decided to designate Chinese Yuan as a global currency in 2015. The main agencies which are keeping Renminbi as forex reserve are Deutsche Bundesbank, the German Central Bank, European Central Bank (ECB) and International Monetary Fund (IMF) too. And recently our neighbour Pakistan also decided to make Yuan as a primary Foreign currency. But China has a long way to go. Currently, the share of Renminbi in the global forex reserves is just 1.08 per cent with US Dollar dominating at 63.5 per cent of all reserves. Euro is next with 20 per cent.

So, what is the Chinese stake in this? They have a long and ambitious plan for this. Let’s see how China expects to be benefitted out of this:

Firstly, to dominate global oil market, China would promote its currency in global oil trade. Secondly, since it will involve future price trading and benchmarking, it will protect them from higher price surges and they will be able to affect global oil prices in the long term. As oil prices are rising once again, the biggest importer of oil will have the future assurance of prices. 

Thirdly, many Chinese industries are using a different kind of crude grades for their various applications. And, since, they are having different pricing for these types of crudes they can effectively benchmark the same in the international market and, hence, get benefitted.

China was ready to launch their INE or “Shanghai International Energy Exchange Program” in 2016 itself but the sudden dip in global oil prices forced them to postpone this move and wait for a right opportunity. With the improvement in global oil index, they are ready to start it. 

So, who will participate in this programme and make it a success? 

  • As mentioned earlier, China already has a sizeable share of global trade, including that with the oil-producing nations. China will try to replicate some of it in its energy exchange.   
  • Also, there are many countries like Pakistan who do import oil and are under the influence of China. They will certainly form part of the future trade in INE. Though the value will be small, it will give a push to the program.   
  • Chinese ‘Belt and Road Initiative” is aimed at connecting countries to create a Eurasian Trade corridor. Some of these countries, especially erstwhile Russian Federation, are producers and exporters of crude too. They are likely to join INE to form a syndicate against the global monopoly of US Dollar. Russia has already started by selling some part of its oil to China against Renminbi.   
  • For Middle Eastern countries who are still the biggest producers of oil, the risks caused by the dominance of United States will reduce. This resulted in the fall of global oil prices in the last few years.   
  • Global oil traders see China as the fastest growing market for their oil products. 

The global oil market is controlled by the Middle Eastern countries and their reliance on the United States are much higher than China. Since the number of countries is small, the risks involving the prices are high and, last but not the least, breaking the monopoly of US Dollar is extremely difficult, especially where such unpredictable commodity is involved.

The author is a veteran from an elite unit of Armed Forces, having keen interest in defence, internal security, strategy and international relations

 

http://www.dnaindia.com/analysis/column-fight-for-global-oil-market-2588208

  • Thanks 1
  • Upvote 1
Link to comment
Share on other sites

  • 2 weeks later...

How China Is About to Shake Up the Oil Futures Market

By 
Sungwoo Park
March 7, 2018, 7:10 PM CST

 

China, the world’s biggest oil buyer, is opening a domestic market to trade futures contracts. It’s been planning one for years, only to encounter delays. The Shanghai International Energy Exchange, a unit of Shanghai Futures Exchange, will be known by the acronym INE and will allow Chinese buyers to lock in oil prices and pay in local currency. Also, foreign traders will be allowed to invest -- a first for China’s commodities markets -- because the exchange is registered in Shanghai’s free trade zone. There are implications for the U.S. dollar’s well-established role as the global currency of the oil market.

 
 

1. When will trading begin?

From March 26. Daytime trading hours will be from 9 a.m. to 11:30 a.m. and 1:30 p.m. to 3 p.m. local time and at night from 9 p.m. through 2:30 a.m. The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world’s biggest crude importer. The Asian nation’s purchases reached a record high last month. Seven grades will be deliverable, including Dubai crude, Oman crude, Basrah light oil and China’s Shengli oil. The contracts will have 36 delivery months with the first 12 months as rolling contracts.

 
 

Top Oil Buyer

China surpasses U.S. as world's biggest crude importer

Sources: China's General Administration of Customs, U.S. EIA

 

2. Why is this important for China?

Futures trading would wrest some control over pricing from the main international benchmarks, which are based on dollars. Denominating oil contracts in yuan would promote the use of China’s currency in global trade, one of the country’s key long-term goals. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts.

 
 

3. How do oil futures work?

Futures contracts fix prices today for delivery at a later date. Consumers use them to protect against higher prices down the line; speculators use them to bet on where prices are headed. In 2017, oil futures contracts in New York and London outstripped physical trading by a factor of 23. Crude oil is among the most actively traded commodities, with two key benchmarks: West Texas Intermediate, or WTI, which trades on the New York Mercantile Exchange, and Brent crude, which trades on ICE Futures Europe in London.

 
 

4. Why didn’t China begin trading futures until now?

Lower crude prices have played a part. Chinese oil futures were proposed in 2012 following spikes above $100 a barrel, but prices in 2017 have averaged little more than $50. There’s also concern over volatility. China introduced domestic crude futures in 1993, only to stop a year later because of volatility. In recent years, it repeatedly delayed its new contract amid turmoil in equities and financial markets. Such destabilizing moves have often prompted China’ government to intervene in markets in one way or another.

5. What’s China’s track record in commodities?

Nickel was the last major commodity to be listed there in 2015; within six weeks, trading in Shanghai surpassed benchmark futures on the London Metal Exchange, or LME. In China, speculators play a far greater role, boosting trading volumes but making markets susceptible to volatility. In early 2016, the then-head of the LME said it was possible some Chinese traders did not even know what they were trading as investors piled into everything from steel reinforcement bars to iron ore. Steep price rises relented when China intervened with tighter trading rules, higher fees and shorter trading hours.

6. Will foreigners buy Chinese oil futures?

That remains to be seen. Overseas oil producers and traders would need to swallow not just China’s penchant for occasional market interventions but also its capital controls. Restrictions on moving money in and out of the country have been tightened in the past two years after a shock devaluation of the yuan in 2015 prompted a surge in money leaving the mainland. Similar hurdles have kept foreign investors as bit players in China’s giant stock and bond markets. In another shift in for commodities markets, China recently approved a plan to allow overseas investors to trade directly in mainland iron ore contracts.

7. Could the yuan challenge the dollar’s dominance in oil?

 

Not any time soon, since paying for oil in dollars is an entrenched practice, according to some analysts. Shady Shaher, head of macro strategy at Dubai-based lender Emirates NBD PJSC, says it makes sense in the long run to look at transactions in yuan because China is a key market, but it will take years. Bloomberg Gadfly columnist David Fickling argues that China doesn’t have “nearly the influence in the oil market needed to carry out such a coup.” On the other hand, paying in yuan for oil could become part of President Xi Jinping’s “One Belt, One Road” initiative to develop ties across Eurasia, including the Middle East. Chinese participation in Saudi Aramco’s planned initial public offering could help sway Saudi opinion toward accepting yuan, which is used in only about 2 percent of global payments.

 

https://www.bloomberg.com/news/articles/2018-03-08/trump-to-sign-steel-tariff-order-with-wiggle-room-for-allies

  • Thanks 2
Link to comment
Share on other sites

China expects yuan to play greater global role

 
Published: March 11, 2018
6SHARES
 SHARE TWEET EMAIL
Has inked currency swap agreements with over 30 countries and regions since late 2008 PHOTO: REUTERS

Has inked currency swap agreements with over 30 countries and regions since late 2008 PHOTO: REUTERS

BEIJING: As China plans to further open up its market and promote free global trade and investment, its currency yuan is expected to play a greater global role.

“The drive will make further progress after China gradually makes its capital account convertible and ease other restrictions,” central bank Governor Zhou Xiaochuan told a press conference on the sidelines of the first session of the 13th National People’s Congress.

Chinese yuan’s globalisation journey generally started from piloting renminbi settlement in cross-border trade in 2009 and picked up pace in 2016 when the International Monetary Fund included yuan in the basket of currencies that make up Special Drawing Rights, an alternative reserve asset to the dollar.

China has inked bilateral currency swap agreements with over 30 countries and regions since late 2008 to facilitate cross-border trade and investment.

The internationalisation of yuan had slowed down amid depreciation pressure since August 2015, when the People’s Bank of China (PBOC) reformed the yuan’s mid-point rate determination mechanism, but the momentum picked up in 2017 with a stronger-than-expected yuan.

Data from international financial transaction agency SWIFT showed that about 1.66% of global payments processed in January were denominated in yuan, edging up slightly from the previous month but still lower than a record high of over 2%.

In January, Pakistan’s central bank adopted the yuan as a currency for trade with China. Central banks in European countries including France and Germany are including the yuan in their forex reserve mix.

Published in The Express Tribune, March 11th, 2018.

https://tribune.com.pk/story/1656647/2-china-expects-yuan-play-greater-global-role/

  • Thanks 1
  • Upvote 1
Link to comment
Share on other sites

The Future of China's Yuan vs. the U.S. Dollar;

The expectations of a weaker yuan against the dollar have been replaced by expectations of a revaluation. So, what happens next?

noavatar_big.gif
    Mar 11, 2018 4:30 AM  PT
l_5a9e8a5463ec9.jpg
author: Karen Liu   
 

The central parity rate of the Chinese yuan (RMB) has appreciated around 10 percent against the U.S. dollar, from 6.95 to 6.34, since the start of 2017. In turn, it seems the expectations of a weaker renminbi against the dollar have been replaced overnight by expectations of a revaluation.

So, what is the reason behind the sudden appreciation of the RMB exchange rate? And where will the future RMB exchange rate go?

image.png

(Source: XE Exchange Rates)

 

One reason for the strength of the yuan against the dollar, obviously, is the greenback's weakness.

The dollar index, a gauge that measures the U.S. currency's strength against six other major currencies, has declined more than 5 percent since last December. The index will more likely continue the losing streak as macroeconomic and policy factors are expected to restrain the strength of the U.S. dollar, ICBC International economist Cheng Shi said in a report.

Another reason for the yuan's appreciation, more importantly, comes from the sequential reforms of the central parity price mechanism of RMB. After the so-called "8/11 currency reform" launched on August 11, 2015, China adopted the "the managed floating" exchange rate regime characterized by its "peg to a currency basket" and "reference to the previous day's closing price."

In detail, the former means, for example, if the RMB is pegged to the basket of currencies consisting of 1 unit of the U.S. dollar and 6 units of Japanese yen, then because of changes in the U.S. dollar/Japanese yen exchange rate, which is out of China's controls, China has to change the U.S. dollar/Chinese yuan exchange rate correspondingly.

While the latter means, for example, if today's closing price falls, tomorrow's central parity rate would be set lower. Hence, the official exchange rate, which is set by the People's Bank of China (PBOC), would move in line with the changes in supply and demand in the foreign exchange market with very strong pro-cyclicality, which indicates an important step towards a floating exchange rate.

These two factors usually "restrict" with each other to cause an "inertial" decline in the RMB exchange rate, which is always in a downtrend, regardless whether the U.S. dollar rises or falls. Because of this, we have the continued depreciation after the 8/11 reform.

Limitations of Flexibility

As Zhang Ming, researcher at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, believed, the RMB exchange rate still lacks sufficient flexibility.

To fix the limitation of this pricing mechanism, the PBOC last May deepened the reform and introduced a third factor, known as the counter-cyclical factor, into the exchange rate formation mechanism. This new factor weakens the significance of the daily closing price against the dollar in the central parity calculation by hedging against the sustained depreciation pressure.

Correcting the "pro-cyclical" trend makes the currency more market-oriented and helps stabilize expectations. It's observed that more than 80 percent of the yuan's appreciation last year occurred after the introduction of the counter-cyclical factor. That is the main reason for the rapid appreciation of the RMB in 2017.

The aforementioned reforms on pricing mechanism are important in explaining the fluctuation of the yuan against the dollar in recent years, but the mechanism itself is just a price regulation tool with the aim of showing the "true" market-oriented exchange rate as much as possible.

Theoretically, the "true" exchange rate should be determined by economic fundamentals and should reflect the market supply and demand. When China's GDP expanded 6.9 percent last year, picking up for the first time in seven years and well above the government's annual target of around 6.5 percent, global investors became more optimistic about China's economic outlook and the appreciation expectation was strengthened. As a result, higher demand for the Chinese yuan pushed up the central parity rate of RMB.

Points to Consider

Looking into the future, with expectations of further reforms to support a more flexible exchange rate, we still have to consider the following situations in predicting the "true" exchange rate:

1. Balance of payments. When the income is larger than the expenditure (i.e., a surplus), the demand for the currency of the country exceeds its supply, and the exchange rate will rise. Conversely, when a scenario of deficit occurs, the exchange rate will fall.

2. Inflation. Inflation will inevitably lead to the devaluation of the currency, causing the fluctuation of exchange rate.

3. Interest rate. The country-specific interest rate level can directly affect the short-term capital flow across countries and affect the exchange rate.

4. Market expectations. Investors' (irrational) expectations about a country's economic situation, balance of payments, inflation, and interest rate prospects will cause the country's currency to be bought or sold in large quantities, driving the exchange rate to fluctuate.

5. Macroeconomic policies. Macroeconomic policies of a country, especially fiscal and financial policies, have a greater impact on exchange rates.

6. Intervention by monetary authorities.

Based on the viewpoint of fundamentals, during the year, the RMB may still have room for appreciation against the U.S. dollar because of a more optimistic expectation about China's economic outlook.

But in the long run, China's economy is facing many challenges, such as high debt levels and fast debt growth, industrial overcapacity, an imbalanced real estate market. Sustained appreciation of the yuan might not occur, but fluctuations would be normal given uncertainties in China's economic situation and in global economic situations as well.

As Guotai Junan Securities pointed out from a trend point of view, "we think the RMB exchange rate against the US dollar may be 6.4-6.6, the US dollar index is likely to fluctuate in the 90-92 range, the volatility may be longer."

 

http://www.capitalwatch.com/article-1818-1.html

  • Upvote 1
Link to comment
Share on other sites

  • 2 weeks later...
 
 

China allows foreigners to enter the payment systems market

China allows foreigners to enter the payment systems market
 
 21 March 2018 03:11 PM

Direct : China announced that it would allow foreign companies Adjul payments market is estimated to have a 27 trillion dollars, in a move aimed at increasing the second largest economic market in the world opening up.

The People's Bank of China said Wednesday that foreign investors could begin to apply for licenses to set up payment systems and would be treated as domestic companies.

Those applying for licenses should establish local units and build a payment infrastructure, including crisis recovery systems, and store client information locally, the bank said.

China's payment companies had operations worth 169 trillion yuan ($ 27 trillion) last year, nine times higher than in 2013.

To allow foreign companies to enter a payment market through specific regulations helps to increase innovation, creates a fair environment for companies and develops payment providers' services.

This week, the Chinese parliament decided to appoint Yi Yang as president of the People's Bank , after Zhou Xiaochuan,

the former president, took office for 15 years.

https://www.mubasher.info/news/3249968/الصين-تسمح-للأجانب-بدخول-سوق-أنظمة-المدفوعات

  • Thanks 1
  • Upvote 3
Link to comment
Share on other sites

The End of the Petrodollar?

Supporters of Kenyan opposition leader Raila Odinga of the National Super Alliance (NASA) coalition burn a U.S. dollar bill during a protest against U.S. Ambassador Robert Godec near the embassy building in Gigiri area of Nairobi, Kenya February 16, 2018. REUTERS/Thomas Mukoya

This long-term economic trend should greatly trouble Washington.

March 20, 2018

In a move that could portend massive shifts in the global oil game, the Shanghai International Energy Exchange will soon unveil an oil-futures contract denominated in Chinese yuan rather than U.S. dollars (product symbol: SC). Experts warn that the growing clout of Chinese currency in international financial markets could erode the primacy of the U.S. dollar, a long-term economic trend that should greatly trouble Washington.

The International Energy Exchange conducted a final set of drills to test trading, settlement, and quote transmission back in December. China’s Securities and Regulatory Commission has announced that the crude-futures contract will launch on March 26.

The new benchmark is so significant because it directly challenges the dollar-dominated pricing scheme of crude oil markets—commonly known as the petrodollar system—which helps to undergird the dollar’s status as the international reserve currency. That arrangement dates back to 1974, when Saudi Arabia and other regional oil suppliers, in exchange for sustained U.S. military aid and equipment, agreed to exclusively accept the Greenback for oil sales and—perhaps most importantly—to invest their oil revenues into U.S. treasuries.

This process, often referred to as “petrodollar recycling,” is a win-win for all involved: oil-rich states enjoy a safe place to store their petro-profits, and the United States gains a key source of financing for its deficit spending. With few exceptions, any country wishing to purchase oil must first obtain U.S. dollars, creating a significant demand for the currency in international markets. Thus, the petro-dollar also plays a critical role in generating global confidence in the dollar. And in currency markets, confidence is king.

The widespread pricing and trading of crude in yuan, or the petro-yuan, would shake this global confidence and simultaneously serve a number of strategic purposes for the People’s Republic. The Chinese government has long sought to internationalize the yuan, also known as the RMB, to boost its economic power and reduce its dependence on the dollar. As the world’s largest crude oil importer and primary source of investment capital for oil-producing nations, China would naturally benefit from using its own currency over that of a geopolitical competitor.

The Chinese Communist party understands, however, that a strong currency is a double-edged sword for the world’s largest export economy. Indeed, China has been accused by many in the international community—including President Trump—of currency manipulation, or the economic policy of devaluing the yuan to gain a trade advantage. While the case for such manipulation was clear a decade ago, recent data reveals convincingly that China has slowly but surely allowed the yuan to appreciate in value.

As China continues to pursue an assertive foreign policy under its powerful president, Xi Jinping, the yuan’s regional influence is sure to follow. Beijing’s ambitious One Belt One Road initiative—which seeks to create trade networks across the Eurasian continent and Middle East—will invigorate the yuan’s march toward internationalization. China could also use its leverage over key oil exporters to force the adoption of the Renminbi in energy trade. Middle East producers such as Saudi Arabia and the UAE have watched their market share fall to U.S. shale, and are desperate for access to the world’s most dynamic energy market. Furthermore, the persisting low-oil price environment may leave them with little choice if Beijing insists on settling its oil contracts in yuan.

So does China’s new benchmark pose a real threat to the dollar’s oil hegemony? Not yet. The dollar will not cede its dominance in oil markets any time soon, especially as U.S. crude oil output reaches all-time highs. Even a Saudi decision to also conduct oil trade in yuan would not be enough to unseat the petrodollar. Beijing’s penchant for market intervention and strict capital controls make the yuan a less attractive option than the Greenback to foreign-energy producers. Instead, China is likely to build confidence in the yuan gradually, through steady economic growth, proactive foreign engagement, and the inevitable liberalization of its monetary policy.

That, in turn, could signal trouble for the petrodollar in the future. After all, the U.S. dollar may seem unassailable now, but as the Chinese proverb says, “Dripping water pierces a stone.”

James Grant is a Junior Fellow at the American Foreign Policy Council in Washington, DC, where he focuses on energy security issues.

 

http://nationalinterest.org/feature/the-end-the-petrodollar-25002

  • Thanks 2
  • Upvote 1
Link to comment
Share on other sites

7 hours ago, Botzwana said:

Geez.  What are you guys in the U.S. gonna do?  Geez louise.  The dollar could crash fast no?

 

I don't think most people have any idea of this story, or what it means to the future of the dollar.... I don't think anything will happen immediately, but over time world money changers will shift their investments.... Follow the money.

 

B/A

  • Upvote 1
Link to comment
Share on other sites

(edited)
52 minutes ago, bostonangler said:

 

I don't think most people have any idea of this story, or what it means to the future of the dollar.... I don't think anything will happen immediately, but over time world money changers will shift their investments.... Follow the money.

 

B/A

Starts in 3 days........

 

PS.  This should really be in the news section, as very few of us read the in economy section, and this is something we all need to know about!

Edited by Mxmann
  • Upvote 1
Link to comment
Share on other sites

1 hour ago, rw.sutton said:

 

AWN_DollarReboot_chart_0717_006.jpg

 

It has been said, that we hold a lot of other countries gold in storage... When France or England, I can't remember which, asked to see thier gold reserve there was a huge delay, and it was said we were shuffling it around to make it look like their gold was accounted for when they arrived... I don't remember where I saw that story, it might have been Alex Jones.

 

B/A 

  • Upvote 1
  • Downvote 1
Link to comment
Share on other sites

PetroYuan Futures Open - Over 10 BillIon Notional Trades In First Hour

Profile picture for user Tyler Durden
Sun, 03/25/2018 - 22:14

After all the preparation, all the expectation, cheerleading and doomsaying, China's Yuan-denominated crude oil futures contract began trading tonight and appears to be off a good start with well over 10 billion yuan notional traded within the first hour.

So far it has tracked WTI futures well, trading at around a $2 premium to WTI (when translated from yuan to USD)...

2018-03-25_18-54-50.jpg

Additionally, well over 23,000 contracts have traded within the first hour for a notional trading volume of over 10 billion yuan - more than $1.5 billion notional... signaling significant demand.

Offshore Yuan is moving in sync with 'Petroyuan' futures - as WTI tends to track the USD.

2018-03-25_19-12-58.jpg

As we most recently noted, after numerous "false starts" over the last decade,  the “petroyuan” is now real and China will set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.

china-vs-us.png

This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency.

But this isn’t just some slow, news day “fad” that will fizzle in a few days.

A Warning for Investors Since 2015

Back in 2015, the first of a number of strikes against the petrodollar was dealt by China. Gazprom Neft, the third-largest oil producer in Russia, decided to move away from the dollar and towards the yuan and other Asian currencies.

Iran followed suit the same year, using the yuan with a host of other foreign currencies in trade, including Iranian oil.

During the same year China also developed its Silk Road, while the yuan was beginning to establish more dominance in the European markets.

But the U.S. petrodollar still had a fighting chance in 2015 because China’s oil imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote

Despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day.

That problem has since gone away, signaling China’s rise to oil dominance…

The Slippery Slope to the Petroyuan Begins Here

The petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending. Take that away, and the U.S. is in trouble.

It looks like that time has come…

A death blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude

petroyuan-1024x587.png

Now that China is the world’s leading consumer of oil, Beijing can exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s suspected that this is what’s motivating Chinese officials to make a full-fledged effort to renegotiate their trade deal.

So fast-forward to now, and the final blow to the petrodollar could happen starting today. We hinted at this possibility back in September 2017

With major oil exporters finally having a viable way to circumvent the petrodollar system, the U.S. economy could soon encounter severely troubled waters.

First of all, the dollar’s value depends massively on its use as an oil trade vehicle. When that goes away, we will likely see a strong and steady decline in the dollar’s value.

Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar.

The Petrodollar’s Downfall Could be a Lift for Gold

Amongst all the trouble ahead for the dollar, there are some good news too. The U.S. might have ditched the gold standard in the 1970’s, but with gold making a return to world headlines… we could see a resurgence.

For the first time since our nation abandoned the gold standard decades ago, physical gold is being reintroduced to the global monetary system in a major way. That alone is incredibly good news for gold owners.

A reintroduction of gold to the global economy could result in a notable rise in gold prices. It’s safe to assume exporters are more likely to choose a gold-backed financial instrument over one created out of thin air any day of the week.

Soon after, we could see more and more nations jump on the bandwagon, resulting in a substantial rise in gold prices.

https://www.zerohedge.com/news/2018-03-25/petroyuan-futures-open-over-10-billion-notional-trades-first-hour

  • Upvote 1
Link to comment
Share on other sites

Death of US dollar? China launches petro-yuan to challenge greenback’s dominance

Published time: 26 Mar, 2018 09:32
Death of US dollar? China launches petro-yuan to challenge greenback’s dominance
© Ohde / Global Look Press
  • 1715
  •  
  •  
  •  
  •  
  •  
  •  
The highly anticipated yuan-backed crude oil futures have been launched in Shanghai. China is the world’s biggest oil consumer, with eyes on rival benchmarks Brent and WTI as well as the US currency.

Trading of the new oil futures contracts for September settlement started on the Shanghai International Energy Exchange at 440.20 yuan ($69.70) per barrel, reports Chinese daily the South China Morning Post. Some 18,540 lots have reportedly been sold and purchased so far.

 
 

China set to roll out petro-yuan before year end, dollar dominance demise looms? https://on.rt.com/8ql4 

 
 

The long-awaited step evoked a surge in global prices for oil with Brent Crude soaring to $71 a barrel for the first time since 2015. US crude benchmark West Texas Intermediate (WTI) reached the highest level in three years at $66.55 per barrel, before retreating to $65.53.

Experts see China’s yuan-dominated contracts as historic as the new futures symbolize the first time that foreign investors can access a Chinese commodity market. The launch ends years of setbacks and delays since the country’s first attempt at listing the securities in 1993.

At the same time, the petro-yuan launch is seen as a blow to the US dollar that has been weakening in recent months. The US dollar is the predominant settlement currency for oil futures contracts. On Monday, the greenback slipped to a 16-month low against the Japanese yen, but remained steady against a basket of six major currencies.

Chinese authorities have reportedly accelerated the launch amid growing crude imports. Last year, the country outpaced the US as the world’s number one importer of oil. Thus, the contracts may not only help to win some control over pricing from the major international benchmarks, but also promote the use of Chinese currency in global trade.

The greenback will get weaker, as soon as other nations have a real credible alternative to it, Ann Lee, Adjunct Professor of Economics and Finance at New York University and author of the book ‘What the US Can Learn From China’, told RT.

“It is more of a game changer for the US. As soon as other nations have a real credible alternative to the US dollar, they can dump dollars and switch to the yuan which can spark a dollar crisis. If that happens, not only will there be inflation from the tariffs, but also from the flood of dollars,” said Lee.

For more stories on economy & finance visit RT's business section

https://www.rt.com/business/422314-petro-yuan-futures-dollar-death/

  • Upvote 1
Link to comment
Share on other sites

Oil surging to multi-year highs as China launches crude contracts backed by yuan

Published time: 26 Mar, 2018 08:20Edited time: 26 Mar, 2018 10:34
Oil surging to multi-year highs as China launches crude contracts backed by yuan
© Sergei Karpukhin / Reuters
  • 54
  •  
  •  
  •  
  •  
  •  
  •  
Crude oil prices rose to their highest level in over three years after yuan-backed crude oil futures debuted strongly on the Shanghai exchange on Sunday.

North Sea Brent Crude surged above $71 per barrel for the first time since 2015 before retreating, though still trading strongly above $70 for only the second time in over three years.

US benchmark West Texas Intermediate (WTI) also hit the highest level since 2015 at $66.55 per barrel, before retreating to $65.53.

Crude oil futures in Shanghai rose 6 percent on the debut of the petro-yuan. Investors rushed in to buy the new oil contracts from the world’s largest oil consumer, China.

“China surpassed the US to become the world’s largest importer of crude in 2017...so [naturally], China would want to play a more active role in influencing the price of crude oil,” said Sushant Gupta, research director at energy consultancy Wood Mackenzie, as quoted by Reuters.

“Prices assessed at the Shanghai exchange will reflect China’s crude supply and demand,” Gupta added.

Some investors have expressed concern that the petro-yuan may face regulatory interference from Beijing, as with iron ore and coal, dissuading some overseas customers. This did not stop global commodity trading giant Glencore from buying the Chinese futures on the first day of trading.

Futures contracts are used to fix prices today for later delivery, usually within 60 days. Consumers seek to protect themselves from higher prices, while investors speculate, trying to guess where prices are headed.

Analysts have noted that the launch of the petro-yuan could shatter the petro-dollar’s dominance of the crude oil market. Nevertheless, it will take time for China to gain enough influence to challenge the greenback.

For more stories on economy & finance visit RT's business section

https://www.rt.com/business/422304-petro-yuan-oil-prices/

  • Thanks 1
  • Upvote 1
Link to comment
Share on other sites

 

China aims to shake up oil-futures market with own contract

 

Published: Mar 26, 2018 4:52 a.m. ET

 
 
 1
 

 

The yuan-denominated crude contract launches, meaning for the first time non-Chinese can trade in Chinese commodity markets

MW-EW701_China__20160927111853_ZH.jpg?uuid=b366c584-84c5-11e6-9c39-00137241c023Reuters
A crude oil importing port in Qingdao. China, the world’s largest oil importer, is launching a yuan-denominated crude futures contract.
MW-GC992_myraSa_NS_20180202134701.jpg

By

MYRAP. SAEFONG

MARKETS/COMMODITIES REPORTER
 

China, the world’s largest oil importer, is launching a yuan-denominated crude futures contract with the potential to become a benchmark for global oil transactions. But it must overcome many challenges to earn a place alongside the internationally recognized U.S. dollar-denominated contracts.

Tim Seymour, managing partner of Seymour Asset Management, notes that because the contract covers a product handled in the Shanghai Free Trade Zone, this will be the first time non-Chinese can trade in Chinese commodity markets. The trade zone, launched in 2013, is open to foreigners and lets goods and capital flow freely without import duties.

This “will begin to create a 24-hour market for trading oil, especially where some of the largest buyers of oil are located,” Seymour says.

The crude-oil futures began changing hands on March 26 on China’s Shanghai International Energy Exchange. They will be traded in the Chinese currency, in a market that’s ruled by the greenback-denominated West Texas Intermediate, the U.S. benchmark CLK8, -0.32%  , and Brent crude LCOK8, -0.10%  , its global equivalent.

“China is the largest net buyer of oil and [other petroleum] products,” says Seymour, and is intent on securing enough energy for its needs.

In 2017, China imported 8.4 million barrels of oil a day, versus 7.9 million for the U.S., according to the Energy Information Administration. China wants its importance as the top importer “reflected in its stature in the world,” says Matt Badiali, senior analyst at Banyan Hill.

 

“What better way to do that than to supplant the U.S. dollar with the yuan?” asks Badiali.

He believes that oil futures traded in China will “become a global benchmark, based on the crude basket that will be offered, and the power of China’s economy.” They will “directly challenge WTI and Brent.”

This year, WTI oil futures have climbed around 9%, while Brent has tacked on more than 5%.

What futures contract covers

Seven grades of crude will be accepted for delivery under the Chinese futures contract, including Basrah Light, a Middle Eastern high-sulfur “sour” oil. China is the biggest buyer of Basrah Light, with 618,000 barrels a day delivered in 2017, with the second and third purchasers being India and the U.S., according to Matt Smith, director of commodity research at ClipperData.

“The competition with the U.S. for Basrah Light is most likely the most interesting aspect of this new futures contract,” notes Smith.

Check out: Who gets hurt in a trade war? Mostly not China

The contract has “been in the works for over half a decade, and although it may be off to a modest start, the ultimate goal is to create a yuan-denominated global crude benchmark,” he continues. “Given this underlying ambition, we should not be dismissive of it growing in prominence to be a leading benchmark over the coming decade.”

Banyan Hill’s Badiali says the fact that these contracts are “signed up to be delivered in yuan is important. … That means China has a major inroad into oil deals in the Middle East.” It also marks a bid to “strengthen the yuan in the eyes of the world,” he maintains.

But being traded in yuan also puts the futures at a big disadvantage: They will have limited liquidity.

The vast majority of traders “have little incentive to trade the contract, given the contract specifications, most importantly the [yuan] currency, as [the U.S. dollar] is the global standard for oil trading,” says Michael Corley, president of Mercatus Energy Advisors.

“It will be quite a challenge for the contract to even become a regional benchmark, let alone a global benchmark,” he adds. The main interest will come from Chinese refiners, he observes, but “it simply isn’t an attractive contract to most global market participants.”

Trading in West Texas Intermediate on the New York Mercantile Exchange averages roughly 1.4 million contracts a day, while daily volume is just shy of one million for Brent on the ICE Futures Europe exchange, he says. He doesn’t expect the Chinese contract to soon steal much, if any, volume from either, as “they are simply too well-established, globally acceptable benchmarks.”

Still, Corley adds, given that China is one of the world’s largest oil consumers, if the contract succeeds, that would “indeed provide China with more pricing power, much to the dismay of their primary suppliers, the Middle East producers.”

 

blob:https://www.marketwatch.com/e5e50bdc-9745-49ec-91f8-eec15dab33d4

 

https://www.marketwatch.com/story/china-aims-to-shake-up-oil-futures-market-with-own-contract-2018-03-26

  • Upvote 1
Link to comment
Share on other sites

It’s a big story but it’s not going to change the petro dynamics for a number of years. I’m not too worried about this.  It’s been planned for over 20 years.  

  • Upvote 2
Link to comment
Share on other sites

'PetroYuan' Futures Launch With A Bang, Volume Dominates Brent As Big Traders Step In

Profile picture for user Tyler Durden
Tue, 03/27/2018 - 02:25

As we detailed previously, China’s yuan-denominated crude oil futures launched overnight in Shanghai with 62,500 contracts traded in aggregate, meaning over 62 million barrels of oil changed hands for a notional volume around 27 billion yuan (over $4 billion).

2018-03-26_8-53-36.jpg

As OilPrice.com's Tsvetana Paraskova notesGlencore, Trafigura, and Freepoint Commodities were among the first to buy the new contract, Reuters reports.

2018-03-26_8-54-40.jpg

After an initial surge in volume that outpaced overnight transactions in global benchmark Brent crude in London, trading tapered off toward the end of the session

2018-03-26_5-47-22.jpg

Within minutes of the launch, the price had gone up to almost US$70.85 (447 yuan) from a starting price of US$69.94 (440.4 yuan) per barrel. The overall price jump for the short trading session came in at 3.92 percent.

Many awaited the launch eagerly, seeking to tap China’s bustling commodity markets, although doubts remain whether the Shanghai futures contract will be able to become another international oil benchmark. These doubts center on the fact that China is not a market economy, and the government is quick to interfere in the workings of the local commodity markets on any suspicion of a bubble coming.

To prevent such a bubble in oil, the authorities made sure the contract will trade within a set band of 5 percent on either side, with 10 percent on either side for the first trading day. Margin has been set at 7 percent. Storage costs for the crude are higher than the international average in hopes of discouraging speculators.

As a result of these tight reins on the new market segment, some analysts believe international investors would be discouraged to tap the Shanghai oil futures. If the first day of trading is any indication, however, this is not the case, at least not for large commodity trading firms.

While it remains to be seen whether they’re in it for the long haul, the participation of Glencore, Trafigura and other foreign investors in the contract’s debut is a boon.

On the other hand, China is not leaving everything to market forces.

One energy consultant told Reuters that:

“The government (in Beijing) seems determined to support it, and I hear a number of firms are being asked or pressured to trade on it, which could help.”

PetroChina and Sinopec are seen as instrumental in providing long-term liquidity for the new market as well.

Additionally, Bloomberg reports that contract grades in Shanghai crude oil futures exchange could account for around 200 billion yuan in trades, based on China’s current import volumes, helping the nation in its efforts to internationalize its currency, Wood Mackenzie’s research director Sushant Gupta says in an emailed note.

Woodmac expects China’s crude import requirements to grow by ~2.1m b/d from 2017 to 2023, noting thatincremental oil-requirement growth in China is much larger than any other country - meaning China would want to play a more active role in influencing the price of crude oil.

Trades on Shanghai International Energy Exchange, also known as INE, will enable China’s crude-buying patterns to become more transparent to the world in the longer term, and will reflect China's crude supply-demand dynamic, becoming a reference for China’s crude market (which is likely to have a bigger influence on global prices).

Woodmac expects INE prices to influence Basrah Light, Oman prices as a start as the grades account for a significant portion of contract volumes. China imports ~600k b/d of Oman crude which is large enough to start influencing Oman prices, which are retroactively set by the Oman Ministry of Oil and Gas.

Interestingly, as the PetroYuan started trading, so offshore yuan began to rally and has extended those gains today...

2018-03-26_8-59-05.jpg

As we most recently noted, after numerous "false starts" over the last decade,  the “petroyuan” is now real and China will set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.

china-vs-us.png

This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency.

But this isn’t just some slow, news day “fad” that will fizzle in a few days.

A Warning for Investors Since 2015

Back in 2015, the first of a number of strikes against the petrodollar was dealt by China. Gazprom Neft, the third-largest oil producer in Russia, decided to move away from the dollar and towards the yuan and other Asian currencies.

Iran followed suit the same year, using the yuan with a host of other foreign currencies in trade, including Iranian oil.

During the same year China also developed its Silk Road, while the yuan was beginning to establish more dominance in the European markets.

But the U.S. petrodollar still had a fighting chance in 2015 because China’s oil imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote

Despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day.

That problem has since gone away, signaling China’s rise to oil dominance…

The Slippery Slope to the Petroyuan Begins Here

The petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending. Take that away, and the U.S. is in trouble.

It looks like that time has come…

A death blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude

petroyuan-1024x587.png

Now that China is the world’s leading consumer of oil, Beijing can exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s suspected that this is what’s motivating Chinese officials to make a full-fledged effort to renegotiate their trade deal.

So fast-forward to now, and the final blow to the petrodollar could happen starting today. We hinted at this possibility back in September 2017

With major oil exporters finally having a viable way to circumvent the petrodollar system, the U.S. economy could soon encounter severely troubled waters.

First of all, the dollar’s value depends massively on its use as an oil trade vehicle. When that goes away, we will likely see a strong and steady decline in the dollar’s value.

Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar.

The Petrodollar’s Downfall Could be a Lift for Gold

Amongst all the trouble ahead for the dollar, there are some good news too. The U.S. might have ditched the gold standard in the 1970’s, but with gold making a return to world headlines… we could see a resurgence.

For the first time since our nation abandoned the gold standard decades ago, physical gold is being reintroduced to the global monetary system in a major way. That alone is incredibly good news for gold owners.

A reintroduction of gold to the global economy could result in a notable rise in gold prices. It’s safe to assume exporters are more likely to choose a gold-backed financial instrument over one created out of thin air any day of the week.

Soon after, we could see more and more nations jump on the bandwagon, resulting in a substantial rise in gold prices.

https://www.zerohedge.com/news/2018-03-26/petroyuan-futures-volume-dominates-brent-big-traders-step

  • Thanks 1
  • Upvote 1
Link to comment
Share on other sites

Single biggest change in capital markets, maybe of all time’: China launches oil futures that could topple dollar

So long petro-dollar, the world’s biggest oil importer wants to trade in renminbi

china.jpg China launched yuan-denominated oil futures contracts 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.Johannes Eisele/AFP/Getty Images
Kate Duguid

March 26, 2018
6:16 PM EDT

 
 

NEW YORK — China’s launch on Monday of its crude futures exchange will improve the clout of the yuan in financial markets and could threaten the international primacy of the dollar, argues a new report by Hayden Briscoe, APAC head of fixed income at UBS Asset Management.

This is the single biggest change in capital markets, maybe of all time

 
facebook_solo.svg 
twitter_solo.svg

“This is the single biggest change in capital markets, maybe of all time,” Briscoe said in a follow-up telephone interview.

The launch of the oil futures denominated in China’s renminbi currency, also known as the yuan, is China’s first commodity derivative open to foreign investors. This marked the culmination of a decade-long push by the Shanghai Futures Exchange (ShFE) to give the world’s largest energy consumer more power in pricing crude sold to Asia.

Already on Monday, Unipec, the 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 newly-launched Shanghai crude futures contract.

This helps cement the exchange’s viability and challenges the petro-dollar system, in which oil deals are executed in dollars. This would decrease demand for the greenback and boost U.S. inflation.

China surpassed the United States in 2017 to become the world’s largest oil importer. Nevertheless, the existing price benchmarks — Brent and WTI crude — are both in dollars, and importers across the world must buy dollars in order to conduct oil deals.

But the move to trade oil in yuan will diminish the role of the greenback in global financial markets, argues Briscoe.

Pricing oil in renminbi and launching a trading hub will raise China’s prominence and integrate it further in global markets. And demand for yuan from foreign investors eager to participate in the Shanghai International Energy Exchange will boost the currency’s value and divert trading away from the dollar. Appetite for dollars would shrink, driving the price of the currency down.

The renminbi’s prominence will only grow with China’s consumption: demand will increase 30.6 per cent to 753 million tons per year in 2040, according to BP. This power will let China bypass the petro-dollar system and demand that its oil purchases be priced in yuan, as seen in Monday morning’s Unipec deal. This may be even more likely in deals in which China has outsized leverage, such as their offer to buy 5 per cent of Saudi Aramco.

As it stands, oil exporters store the revenue from their U.S. oil sales in Treasury bonds — a process known as “petro-dollar recycling.” As a result, the rise of the petro-yuan would also jeopardize a key source of financing for U.S. deficit spending.

© Thomson Reuters 2018

 

http://business.financialpost.com/commodities/energy/update-1-chinese-oil-futures-launch-may-threaten-primacy-of-u-s-dlr-ubs

  • Thanks 3
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.