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Middle East Tensions Support Crude Oil Price at $70 Per Barrel

Middle East Tensions Support Crude Oil Price at $70 Per Barrel

The world's biggest oil buyer is offering yuan-denominated futures that foreigners can buy and sell - a first in Chinese commodities.

Shanghai crude oil futures got off to another strong start in their second day of trading on Tuesday, with more than 16 million barrels of crude changing hands, extending the launch day's high volumes, data showed.

Over 21 million barrels of the sulphur-rich oil were traded yesterday, reports the Wall Street Journal, meaning RMB18.3 billion ($2.9 billion) changed hands.

Futures contracts allow investors to hedge exposure to physical prices, and offering them in yuan could allow energy-hungry China - which a year ago surpassed the United States as the world's largest crude importer - to exercise more control over prices of the type of oil it consumes most.

While it remains to be seen whether they're in it for the long haul, the participation of Glencore, Trafigura and other foreign investors in the contract's debut is a boon.

Singapore-based brokerage Phillip Futures said that "surging production levels persist" in the US.

China kicked off its first ever crude futures on Monday.

Kosovo oppn halts Parliament proceedings by throwing tear gas
Live footage from March 21 shows MPs hastily exiting the chamber as smoke billows out, apparently from multiple tear gas bombs. Kosovo opposition politicians release tear gas in parliament to obstruct a session in Pristina, Kosovo March 21, 2018 .

Lower crude prices have played a part as to why not earlier. The contract closed at 429.9 yuan per barrel ($68.22).

"This is also beneficial for us, because we are among the largest suppliers of hydrocarbons to the China market".

LONDON, March 26 (Reuters) - Crude oil futures slipped on Monday, but losses were capped by a rebound in stock markets and escalating Saudi-Iran tensions.

Later in trading, Unipec, the trading arm of Asia's largest refiner Sinopec, inked a deal with a western oil major to buy Middle East crude priced against the newly-launched Shanghai crude futures contract, a senior company official said on Monday.

The Shanghai contract traded higher than its London and NY counterparts shortly after debuting, at 432.2 yuan ($68.43) per barrel for September settlement at around 0145 GMT, according to Bloomberg News. Worries include how to freely exchange the yuan because of a Chinese clampdown on capital outflows, while some concerns remain about Beijing's heavy handed intervention in its commodity markets in recent years, traders and analysts said.

Shell International Eastern Trading the trading arm of Royal Dutch Shell, was heard to be the seller, said multiple sources that participate in the market, although a Shell spokeswoman declined to comment.

According to Wei, this activity is especially important amid the US-Chinese row over the Trump administration's new high tariffs on Chinese imports, which is largely seen as nothing short of a trade war between Beijing and Washington. "The emergence of a new financial oil price benchmark in Asia has been long-awaited and may prove to have a significant influence over the oil markets in the years to come".

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