China started trading its own crude oil futures

Shanghai crude oil futures jump more than 6%

China launches crude oil futures

Our short-term outlook and medium-term outlook on crude oil is bullish.

In the 4-hourly timeframe, WTI failed to break the January highs of 66.50.

The contracts, which are open to foreign investors, end years of delays and setbacks since China's first attempt to list crude oil futures in 1993. "For oil, we expect the supply deficit of the past couple of quarters to give way to a surplus, driven largely by strong growth in U.S. tight oil supply", Barclays Research analysts said in a note, a reference to United States shale production.

The global benchmark dipped 0.57 per cent, or 40 cents, to $69.71 per barrel, while West Texas Intermediate, the U.S. benchmark, fell below the $65 level to $64.60 per barrel, down one per cent. Looking at reactions in markets, crude oil prices strengthened following the EIA report. That initially eclipsed volumes traded in the Brent May contract, before Europe's benchmark came alive around 0500 GMT. This is the first in Asia and it allows foreign companies to participate, with contracts being settled in renminbi. Prices assessed at the Shanghai exchange will reflect China's crude supply and demand. "The fact that the government is encouraging the exchange and also is not shy about stepping in to occasionally change the rules may discourage worldwide players", said Jeff Brown, president of energy consultancy FGE.

Still, China offers the potential for a deep, liquid market, buoyed by an explosion of interest from mom-and-pop investors that has supported its vast commodities derivative markets from apples to iron ore in Shanghai, Zhengzhou and Dalian. The move will provide the country with new pricing powers, boost its national energy security and help promote the Chinese currency globally.

It is more of a game changer for the US.

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China has launched yuan-dominated crude oil futures, a major step in Beijing's years-long push to win greater sway over oil.

"We were active with Glencore today and I've seen Trafigura in it and Freepoint".

These and other factors mean the contract may have a "hard time" building correlations with Brent and WTI that would make arbitrage possible, said Albert Helmig, chief executive of financial consultancy Grey House and a former vice chairman of NYMEX.

Oil traded above $65 a barrel as easing fears of a global trade war offset concerns over rising USA crude stockpiles, boosting prices to near the highest level this year.

Chinese authorities have reportedly accelerated the launch amid growing crude imports.

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