PetroYuan Futures Launch With A Bang, Volume Dominates Brent as Big Traders Step In
The comments above & below is an edited and abridged synopsis of an article by Tyler Durden
China’s yuan-denominated crude oil futures have launched in Shanghai, with 62,500 contracts traded in aggregate. Over 62 million barrels of oil changed hands for a notional volume around 27 billion yuan (over $4 billion).
After an initial surge in volume that outpaced overnight transactions in global benchmark Brent crude in London, trading tapered off toward the end of the session. The overall price jump for the trading session was 3.92%.
The new market segment is tightly regulated, and some analysts believe international investors will be wary of tapping the Shanghai oil futures. If the first day of trading is any indication, however, this is not the case, at least not for large commodity trading firms.
The petroyuan is real, and China will set out to challenge the petrodollar for dominance. China launching a yuan-denominated oil futures contract will shock investors who have not been paying attention. This could be a death blow for an already weakening US dollar, and the rise of the yuan as the dominant world currency.
Now that China is the world’s leading consumer of oil, Beijing can exert some leverage over Saudi Arabia to pay for crude in yuan. This is likely what’s motivating Chinese officials to make the effort to renegotiate their trade deal.
The final blow to the petrodollar is beginning. Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar.
Despite trouble ahead for the greenback, there is some good news too. The US might have ditched the gold standard in the 1970s, but with gold making a return to world headlines, we could see a resurgence.
A reintroduction of gold to the global economy could result in a rising gold price. It’s safe to assume exporters are more likely to choose a gold-backed financial instrument over one created out of thin air any day of the week.
We could see more and more nations jump on the bandwagon, resulting in a substantial rise in gold prices.
