First ever yuan-denominated oil futures go on sale

Oil prices retreat from 2-month high as US-China trade dispute looms

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.

China's goal in opening a yuan-denominated futures exchange that is also open to foreign traders is to align global crude prices more closely with supply and demand conditions in the country.

That may have changed on Monday, with the launch of Shanghai crude oil futures.

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.

"Prices assessed at the Shanghai exchange will reflect China's crude supply and demand", Gupta added.

The launch of the yuan-denominated oil futures - China's first commodity derivative open to foreign investors - 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.

China's desire to open a domestic market to trade futures has grown as the country's crude imports have boomed.

The futures changed hands in the first 25 minutes as China debuted its oil benchmark. Both futures contracts are commonly used by financial traders.

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.

In a sign the contract has lured overseas interest, global commodity trader and miner Glencore, and big merchants Trafigura and Freepoint Commodities were among the first to trade, although regulatory hurdles and unfamiliar rules may stymie broader take-up in the near term. About 19 foreign brokers had registered to trade the contracts as of last week, the exchange said.

Oil prices reversed earlier gains on Monday as concern over a looming trade dispute between the United States and China weighed on global markets.

Looking further ahead, Wood Mackenzie felt that this would also establish the local regional benchmark for negotiations of spot or term crude oil prices in other markets, such as Japan and South Korea.

The September crude futures contract, or SC1809, jumped to above Yuan 440/b ($69.63/b) at the opening, up by Yuan 24/b or 6% from its starting price of Yuan 416/b set by the INE.

At the end of afternoon session, Shanghai prices were up 3.34 percent at 430.2 yuan, with 40,656 lots traded.

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