No respect for elders: China's new oil benchmark crushing old-timer Brent

No respect for elders China's new oil benchmark crushing old-timer Brent

China yesterday launched its first-ever crude oil futures contract as the world's biggest oil buyer seeks to wield greater power over pricing and challenge the benchmarks in the U.S. and Europe.

However, if traders on this so-so Monday market were casting about for something different to worry about in the weeks and months to come, they had only to look at the latest market report from the International Energy Agency, which pointed out that that the oil industry only discovered 4 billion barrels of new resources a year ago, well short of the 36 billion barrels consumed globally in 2017.

The regulators in the country hope futures will serve as a means of venture capital management for its oil companies, a reference price for industry players and a means to help open the country's financial markets. "I still think there is a general reluctance from global investors to trade Chinese-based contracts".

First-day enthusiasm saw 20 million barrels of September oil changing hands in Shanghai by the 3:00 p.m. (0700 GMT) close, but it's not clear the pace will hold in the night session, which runs from 9:00 pm to 2:30 am, or on into coming days.

"We've seen already this morning it appears to be a liquid contract from the off", said David Martin, JPMorgan Chase & Co's Asia Pacific head of global clearing, at an event for the launch in Shanghai. US West Texas Intermediate (WTI) crude futures also lost half a per cent, or 33 cents, to end at US$65.55.

WTI crude is the main benchmark for USA crude grades and a crucial hedging tool for the US oil industry.

Futures contracts fix prices today for delivery at a later date.

Beyond trade concerns, crude was pressured by a rise in the number of active USA oil rigs to a 3-year high of 804, implying further rises in production.

Geopolitical factors have also offered support. The contracts are not only expected to give the country control over pricing, but will also stimulate trade in yuan - one of the country's main long-term goals.

Singapore-based brokerage Phillip Futures said that "surging production levels persist" in the US.

In post-settlement trading, when volumes are thinner, prices for both benchmarks slipped in tandem with equities markets, and then dropped again after industry group American Petroleum Institute (API) reported a larger-than-expected rise in USA oil inventories. Prices assessed at the Shanghai exchange will reflect China's crude supply and demand.

The exchange said that foreign companies, including Glencore PLC and Trafigura Group, participated in the debut via brokers.

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. A spread of producers also creates stability, preventing situations like Brent saw a year ago, where the failure of a single pipeline risks sending prices spiralling out of control.

The price of SC1809 contracts started at 440 yuan per barrel and closed at 429.9 yuan per barrel, which is 3.34 percent higher than the benchmark price.

Related news:

Hot News

isis-killer-beheading-video-story-top Jaguar self-drive auto revealed in NY
Mar 28, 2018 - 01:08
Waymo is also playing the long game as it looks to launch a large-scale transportation service using self-driving vehicles. Krafcik also noted that Waymo is on the verge of "shifting focus from research and development to operations".

isis-killer-beheading-video-story-top Chinese space lab to fall to Earth within days in 'fiery demise'
Mar 28, 2018 - 01:06
The European Space Agency (ESA ) estimates Tiangong-1 will crash land between the morning of March 31 and morning of April 2 UTC. The 77-tonne U.S. space station Skylab also didn't injure anybody and only parts of it were later gathered.

isis-killer-beheading-video-story-top North Atlantic Treaty Organisation expels seven Russian diplomats over United Kingdom spy poisoning
Mar 28, 2018 - 00:57
British officials have placed the blame squarely on Russian Federation , a charge President Vladimir Putin adamantly denies. The US move came despite Trump's previous promise to improve relations with Moscow.

isis-killer-beheading-video-story-top Gun maker Remington seeks bankruptcy protection amid lawsuits, Trump-linked sales slump
Mar 27, 2018 - 03:16
Remington Outdoor Company's headquarters are in Madison, North Carolina. That allowed it time to seek Chapter 11 bankruptcy protection .

isis-killer-beheading-video-story-top First ever yuan-denominated oil futures go on sale
Mar 27, 2018 - 03:13
China's desire to open a domestic market to trade futures has grown as the country's crude imports have boomed. At the end of afternoon session, Shanghai prices were up 3.34 percent at 430.2 yuan, with 40,656 lots traded.

isis-killer-beheading-video-story-top Stringent security in place for PSL final in Karachi
Mar 26, 2018 - 01:11
Six Pakistan policemen and two civilians were killed, and six members of the Sri Lanka team were injured. Cricket fans stand in a long queue to enter the National stadium.

isis-killer-beheading-video-story-top More US military sales to Saudi Arabia as Trumps welcomes crown prince
Mar 26, 2018 - 01:08
Asked whether he was prepared to pull the United States out of the deal, Trump said "we're going to see what happens". He hailed the military sales as a boost to American jobs .

isis-killer-beheading-video-story-top Palestinian teenager jailed for assaulting Israeli soldier
Mar 26, 2018 - 01:05
The Tamimi family are among villagers who fight for their land rights with Israeli settlers. It includes a fine of about US$1,400 (S$1,840) and a three-year suspended sentence .

isis-killer-beheading-video-story-top Tournament interview gets awkward after coach is asked why he quit
Mar 26, 2018 - 00:59
Two nights after shooting lights out from three, MI struggled from long distance, hitting just 4-of-22 attempts. The Ramblers have defeated Miami, Tennessee, Nevada, and Kansas State in their four tournament wins.

isis-killer-beheading-video-story-top Former Catalan leader Puidgemont held by German police
Mar 26, 2018 - 00:53
Puigdemont was in Finland to talk with lawmakers, but his lawyer tweeted that he had made it out of the country and into Belgium. Later, the suspended leader of Catalonia said that he would be in Belgium until the early elections to the Catalan parliament.

isis-killer-beheading-video-story-top Kansas Holds Off Late Clemson Rally to Reach Elite Eight, 80-76
Mar 25, 2018 - 00:40
DeVoe is the first Clemson guard with at least 30 points and nine rebounds in the same game since Will Solomon had 43 and nine vs. Ultimately, however, Purdue never could make it all up and Texas Tech pulled out a 78-65 win on Friday at the TD Garden.

isis-killer-beheading-video-story-top Dropbox shares jumped almost 40 percent on the first day of trading
Mar 25, 2018 - 00:37
Dropbox is a computing service that allows customers to store documents, videos, photographs and other files in the cloud. The company says more than 90 percent of Dropbox's revenue comes from individual users purchasing subscriptions.

isis-killer-beheading-video-story-top Former Playboy model says Trump tried to pay her after sex
Mar 24, 2018 - 14:13
AC: Hurt you that he saw you in that way? Now, I do remember him saying, 'Oh, there are a bunch of porn stars out there. Former Playboy model Karen McDougal described a 2006 sexual affair she said she had with Donald Trump on Thursday.

isis-killer-beheading-video-story-top Two IndiGo Aircraft Grounded after Engine Problems During Take-off
Mar 22, 2018 - 01:15
The number of flights cancelled between March 25 and March 31 stands at 16 per day, the airline indicated. However, during engine start, the pilot-in-command observed a hydraulic (not oil) leakage from engine 2.

isis-killer-beheading-video-story-top 'Your are beyond the Crown Prince,' Trump praises wealthy Mohammad Bin Salman
Mar 22, 2018 - 01:12
Saudi Arabia's crown prince is promoting himself as a social and an economic reformer, reinventing his kingdom for the modern era. Another point of friction is the war in Yemen, where Saudi Arabia leads a coalition fighting the Iran-backed Huthi rebels.