 |
Louisiana Light • 2 days | 91.16 | -0.74 | -0.81% | ||
|
Bonny Light • 1 day | 95.60 | -0.40 | -0.42% | ||
|
Opec Basket • 2 days | 95.01 | -0.81 | -0.85% | ||
|
Mars US • 8 hours | 88.73 | -0.10 | -0.11% | ||
|
Gasoline • 8 hours | 2.562 | -0.058 | -2.22% |
|
Bonny Light • 1 day | 95.60 | -0.40 | -0.42% | ||
|
Girassol • 1 day | 96.55 | -0.49 | -0.50% | ||
|
Opec Basket • 2 days | 95.01 | -0.81 | -0.85% |
|
Peace Sour • 23 hours | 84.13 | -0.03 | -0.04% | ||
|
Light Sour Blend • 23 hours | 84.63 | -0.03 | -0.04% | ||
|
Syncrude Sweet Premium • 23 hours | 93.23 | -0.03 | -0.03% | ||
|
Central Alberta • 23 hours | 84.13 | -0.03 | -0.04% |
|
Eagle Ford • 2 days | 86.11 | -0.65 | -0.75% | ||
|
Oklahoma Sweet • 2 days | 86.00 | -0.75 | -0.86% | ||
|
Kansas Common • 2 days | 80.00 | -0.50 | -0.62% | ||
|
Buena Vista • 3 days | 95.23 | -0.92 | -0.96% |
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China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold
The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.
The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review. To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.
Last month, the Shanghai Futures Exchange and its subsidiary Shanghai International Energy Exchange, INE, successfully completed four tests in production environment for the crude oil futures, and the exchange continues with preparatory works for the listing of crude oil futures, aiming for the launch by the end of this year. ?
“The rules of the global oil game may begin to change enormously,” Luke Gromen, founder of U.S.-based macroeconomic research company FFTT, told Nikkei Asia Review.
The yuan-denominated futures contract has been in the works for years, and after several delays, it looks like it may be launched this year. Some potential foreign traders have been worried that the contract would be priced in yuan.
Related: Texas Shale Hit Hard By Hurricane Harvey
But according to analysts who spoke to Nikkei Asian Review, backing the yuan-priced futures with gold would be appealing to oil exporters, especially to those that would rather avoid U.S. dollars in trade.
“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Alasdair Macleod, head of research at Goldmoney, told Nikkei.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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Let's suppose that, for example, Iran accepts its oil being paid in yuan.
Would Iran's yuans be accepted as payment for gold by the Bullion banks? Not likely, since they only sell gold for dollars.
If Iran wants to buy gold it will need dollars because nothing else will be accepted as payment by the bullion banks.
Let's suppose that Iran gives China back those yuans in exchange for gold.
Would China give Iran the gold it has in reserve to Iran? Not likely.
Yet, China may give Iran dollars (it has many) in exchange of those yuans that China gave to Iran's as payment for oil, so that Iran may use those dollars as payment for gold. If this happens to be the case, what would the point be having China to pay oil in yuan if sooner or later China will have to receive those yuans back and end up paying its oil bill in dollars?
China's exports are the most competitive and their banks the most stable of the world, CHINA DOES NOT HAVE EVEN ONE SINGLE UNEMPLOYED and they have an economy increasingly independent from exportations and based mostly in internal consuming
Unlike U.S., which import its manufactured goods from China and whose economy depends on oil they steal from other countries... The U.S. charade can collapse in an instant
China is still the world's largest export economy, and Triffin's Dilemma still applies.
ie: The nation with the world's reserve currency must mathematically run a trade deficit, or that currency can't be the reserve.
So China needs to pick one: They can continue to be the world's largest exporter or they can create a gold backed Yuan.
The latter option cascades into a regime-ending spike in unemployment and social unrest. And most likely, war with the West -- born of both internal and external causes. It would be a poor choice.
Meanwhile -- China is the direct beneficiary of the current monetary regime. They are in no hurry to change anything.
No biggie I guess.