China to launch crude futures trading in October at the earliest

02 May 2012 11:09  [Source: ICIS news]

SINGAPORE (ICIS)--China is expected to begin trading in crude oil futures at the Shanghai Futures Exchange (SHFE) after China’s National Day holiday on 1-7 October, at the earliest, sources said on Wednesday.

An SHFE official said earlier the government has not fixed a schedule to launch the trading as it was still being studied.

The SHFE has drafted two preliminary schemes for crude trading and it will organize seminars for futures brokers in Shanghai, Shenzhen and Beijing in early May to gather their opinions on the schemes, according to a statement on the SHFE website.

According to a source with knowledge of the schemes, they are for bonded delivery and cash settlement schemes.

Both schemes will have the Chinese yuan as the currency of the contracts and 100 barrels as a standard lot size, the source said, adding that SHFE will offer conversion to dollar for overseas participants.

It is not immediately known what the benchmark crude of the contracts will be.

Sources said that SHFE is considering a crude basket with typical grades from China and the international market to attract overseas players and speculators and this will help China to establish its presence in the international crude market in the long term.

The delivery site will be in Zhoushan, Zhejiang province, east China, the largest crude oil storing base and one of the biggest crude transhipment ports in the country, according to the source.

Crude futures trading in China will be attractive to global crude producers and investors, said a source from a state-owned oil company, citing its huge crude demand.

China’s crude annual imports have exceeded 200m tonnes and the consumption is more than 400m tonnes since 2009, according to China Customs.

Independent domestic refiners, local government-owned oil companies, foreign oil companies and foreign investment banks are expected to take part in the trading, a south China-based oil trader said.

"We will take part if we get go ahead from the central government for transhipments of imported crude,” a source from an independent refiner in Shandong said.

However, bonded delivery will be a barrier, according to the trader.

Currently only the five state-owned oil majors which have crude import licenses and companies officially permitted to import crude with predetermined import quotas are entitled to crude bonded delivery, he said.

By: Jean Zou
+65 6780 4359

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