China plans to launch crude futures trading at the Shanghai Futures Exchange (SHFE）on March 26, 2018, a move for a greater say in the international crude market.

    The country will trade medium crude with 1.5% sulphur and the API gravity at 32.0, with the specific types of oil and the premium and discount to be decided by the Shanghai International Energy Exchange (INE), a subsidiary of the SHFE, the China Securities Regulatory Commission (CSRC) announced on February 9. The tank farm for crude futures delivery will also be designated by the INE.

    The futures contract will be based on yuan which can be converted into gold, the regulatory commission said. The trading unit will be 1,000 barrels/lot and the minimum change in the pre-tax price will be CNY0.1/barrel. The price shall not fluctuate by more than 4% from the previous trading day, according to the CSRC’s announcement.

    A minimum security deposit of 5% of the contract value will be required for trading crude futures at the SHFE.

    As the country has become the world’s largest crude consumer, its yuan-based crude futures contract may become one of the world’s most important crude benchmarks and shake up the global crude market which is dominated by trading in US dollars. “Oil yuan” may even replace “oil dollar” in the future. As of the end of 2017, major crude oil suppliers to China including Russia, Iran, Angola and Venezuela were already trading oil with China in yuan.

    The country has been preparing for crude futures contract in a bid to have a greater say in the global oil market amid rising dependence on imported crude which reached 69% in 2017. The CSRC had made plans to launch crude futures trading as early as in April 2012 and in November 2013, the SHFE established the INE for the trading of crude futures. After getting approval from the CSRC for crude futures trading in December 2014, the trading center released three drafts in 2015 to solicit opinions on the trading of crude futures. More trading regulations were published by the SHFE and INE in 2017.