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China Revives Plan To Launch Shanghai Crude Oil Futures

Refinery

Earlier this year, China was thought to have indefinitely postponed plans to launch a new oil futures contract, but it’s looking now like it is having a change of heart, and is preparing to launch a Shanghai crude oil futures contract as early as in the second half this year.

According to two sources familiar with the issue who had spoken to Reuters, the earliest expected timing of a possible launch is July this year. The two sources put the timeline somewhere between July and October, but no explanation has been given as to the change in Chinese plans.

In January this year, Beijing was thought to have quietly postponed—probably by years—the launch of the new contract due to international investors’ concern over China’s potentially heavy interventions on money and commodity markets.

China has had ambitions for years to create a new oil futures contract that would be traded on the Shanghai International Energy Exchange INE, but foreign investors had been spooked by Beijing’s policies for the yuan currency and capital outflows and last year’s intervention on the volatile commodity markets, according to sources who spoke to Reuters in January.

Now, an INE spokeswoman told Reuters that “We are actively preparing and are striving to launch the product as soon as possible.”

China has been planning the launch of the new contract to add to the global benchmarks, the WTI and Brent, but faced with investor worries, INE was said to have quietly put those plans on the back burner.

Related: Reeling From Low Oil Prices, Saudis Look To Freeze Megaprojects

In the middle of 2015, China was hoping that it could launch the new contract by the end of that year.

As this did not happen, the timeline was further pushed, and in March 2016 another delay, this time by government review of INE, postponed the launch of the contract to late 2016. A few months later, officials told S&P Global Platts that the launch was unlikely to happen in 2016 because China wanted stricter regulations to prevent high volatility on the equity and steel markets.

By Tsvetana Paraskova for Oilprice.com

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