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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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China’s Oil Futures Jump To Record High

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China’s yuan-denominated crude oil futures contract for September delivery jumped to an all-time high on Tuesday by its daily limit, as speculators are eagerly trading the Chinese futures, while investors are uncertain where the most actively traded international benchmarks—Brent Crude and WTI Crude—are heading.

The Chinese oil futures, launched in March this year, have jumped as much as 5 percent so far in August and have been steadily gaining over the past two weeks.

Meanwhile, Brent Crude and WTI Crude are stuck in a tight range as market participants and traders try to make sense of the conflicting forces in the current oil market—the returning U.S. sanctions on Iran on the one hand, and fears that trade wars could curb demand growth, on the other hand.

On Tuesday, the Chinese crude futures contract for September jumped by its 5-percent daily limit compared to Monday’s settlement price, to US$78.37 (537.20 yuan) per barrel.

At 08:29 a.m. EDT on Tuesday, WTI Crude was up 1.10 percent at $69.24, and Brent Crude was trading up 1.26 at $74.13.

According to Bloomberg, there could be several reasons why the Chinese oil futures are soaring these days, unlike the two most active and important crude oil benchmarks. One is that a weaker yuan versus the US dollar could be enticing traders to buy the cheaper yuan-denominated Chinese futures, Bruce Xue, an analyst with Haitong Securities Co, told Bloomberg. Then China’s reduction of U.S. crude oil imports amid the ongoing trade war raises speculation that the world’s biggest crude importer may see a shortage of cargoes, according to the analyst. Related: The Next Big Energy Standoff Will Happen Here

After months of subdued trading in the December 2019 futures contract, it has now become popular, and one of the reasons behind its appeal could be that Chinese oil traders and speculators prefer to trade futures on a quarterly instead of on a monthly basis, Xue told Bloomberg.

Chinese traders are also more speculative in their trading. According to data compiled by Bloomberg, traders in the Shanghai oil futures have held contracts for less than 2 hours on average, compared to 65 hours of contracts held in Brent.

By Tsvetana Paraskova for Oilprice.com

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  • Cowpoke on August 07 2018 said:
    "Chinese traders are also more speculative in their trading"
    Read that folks, and then READ it again. There is an Asian mindset on gambling and risk taking that is part of their religious and cultural belief system if my memory serves me.
    They strongly believe in the concepts of chance, fate, luck.

    That my friends is a MASSIVE time bomb when you mix that mindset with Billions of leveraged monies speculating.

    Be Cautious... Be VERY cautious.
  • Tom on August 07 2018 said:
    China has also upped their Import Duty of both clear and denatured American Ethanol to 65%, essentially locking both of these low-cost clean octane products out of their market. Really sad for the Chinese People chocking on Air Pollution over there.

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