• Thursday, October 18, 2018

Trump's sanctions on Iran may be creating an oil trading boom — in China

Discussion in 'World Affairs' started by beijingwalker, May 16, 2018.

  1. beijingwalker

    beijingwalker ELITE MEMBER

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    Trump's sanctions on Iran may be creating an oil trading boom — in China
    • Trade in Chinese yuan-denominated crude oil futures has jumped since President Donald Trump pulled the U.S. out of the Iran nuclear deal.
    • There is speculation that restrictions on Iranian oil sales and the lack of access to dollar financing will spur demand for the Shanghai-listed derivatives.
    Huileng Tan | @huileng_tan
    Published 9 Hours Ago Updated 2 Hours Ago
    [​IMG]

    Trade in Chinese yuan-denominated crude oil futures has surged since President Donald Trump pulled the U.S. out of the Iran nuclear deal.

    Launched on March 26, crude oil futures on the Shanghai International Energy Exchange (INE) were met with fanfare — and skepticism about how much a state-managed marketplace could displace the well-established crude trade in the New York Mercantile Exchange's West Texas Intermediate (WTI) and the Intercontinental Exchange's Brent futures.

    But Trump's move to reimpose sanctions on Iran may have spurred interest in the Chinese oil futures. Last Wednesday, daily trade volumes in INE oil futures hit a record of over 240,000 lots, double what they were on Tuesday in Asia, before news of the renewed sanctions broke.

    "Beijing 's attempts to 'internationalize' the contract appear to have paid off."-BMI Research
    By way of comparison, some 1.4 million lots of WTI crude changed hands each day in April this year, while fewer than a million lots of Brent crude were traded daily in the same period. One lot is the equivalent of 1,000 barrels on all three exchanges.

    "There has been speculation that restrictions on Iranian oil sales and the lack of access to dollar financing will boost demand for yuan-denominated Shanghai futures," said BMI Research in a note on Monday. "With China deepening its energy ties with Iran and given Beijing's desire both to support the contact and — relatedly — to further internationalize the use of its currency, payment in yuan and benchmarking against Shanghai futures would seem logical."

    Oil market veteran John Driscoll told CNBC last week that Iranian traders have the option of trading in Chinese yuan-denominated crude oil futures on the Shanghai International Energy Exchange — circumventing any restrictions on dollar-denominated trade and U.S. banks.

    Doubts about how long it will last
    Some industry watchers remain skeptical over the long-term impact Iran will have on the Chinese futures, as Iranian crude is not deliverable into the Shanghai oil contract.

    Even so, interest in the Shanghai oil futures have surpassed expectations, with Chinese state-owned companies and foreign interests taking part in the trade.

    At least one oil sales agreement has been signed with state-owned major Sinopec, Reuters reported.

    "Concerns over heavy state dominance in the oil sector does not appear to be dampening participation in the contract, neither does its denomination in yuan and the added FX risks this brings," said BMI, adding that the futures are gaining tracing.

    "Beijing 's attempts to 'internationalize' the contract appear to have paid off," it added.
    https://www.cnbc.com/2018/05/16/iran-oil-trumps-sanctions-create-crude-trading-boom-in-china.html
     
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  2. BHarwana

    BHarwana ELITE MEMBER

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    This is a big one for China as china buys 25% of Iran's oil production and this will give huge strength to Yuan.
     
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  3. beijingwalker

    beijingwalker ELITE MEMBER

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    As the biggest oil importer in the world, Iran's oil suppy alone may not be enough for China.
     
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  4. BHarwana

    BHarwana ELITE MEMBER

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    Iran's 100% oil supply fills Chinas 32% need it is not enough but it is more than enough to make a difference.
     
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