Crude oil futures softer on U.S. stocks data, weak equities market

Weekly Oil Markets Recap - Running Out Of Toilet Paper

About 18.3 billion yuan in crude oil futures changed hands.

That possibly changed on Monday, as Asia saw the launch of Shanghai crude oil futures.

Trading volumes in Shanghai crude oil futures for delivery in September totalled nearly 15 million barrels during the overnight session and in early trade on Tuesday, far exceeding volumes on the Brent market.

Looking further ahead, Wood Mackenzie felt that this would also establish the local regional benchmark for negotiations of spot or term crude oil prices in other markets, such as Japan and South Korea.

At 9:14 a.m. (0114 GMT), September futures were down 1.7 percent at 426.3 yuan per barrel.

The first trading session saw a total of 62,500 contracts with more than 62 million barrels of crude traded for a notional volume of almost 27 billion yuan ($4 billion), Zerohedge reports.

Oil traded above $65 a barrel as easing fears of a global trade war offset concerns over rising US crude stockpiles, boosting prices to near the highest level this year.

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China first planned to launch its yuan-denominated futures contracts for crude oil in 2012 when oil prices exceeded US$100 a barrel, an apparent effort to secure bargaining power to price the commodity in light of the country's increasing reliance on imported oil.

However, the contract will also come with quirks that traders used to London's Brent or U.S. West Texas Intermediate (WTI) may find less appealing, including shorter business hours, unique Chinese trading habits and extended holiday breaks.

The admission of foreign investors directly to futures trading occurs for the first time in Chinese commodity markets. "Refinery maintenance is in full swing", causing "big builds in crude-oil stocks and big draws in products", he said. The first three days of trading have been fairly volatile, with a small number of outstanding contracts but with very high trading turnover.

The current deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, expires in March 2018. The global benchmark traded at a $5.06 premium to WTI.

Skeptics argue that hurdles such as capital controls, regulatory risk and market intervention in other Chinese securities have made investors cynical about the prospect of Shanghai futures becoming a regional price-setter. Yuan-based futures will help promote the yuan as a global currency.

Chinese exchanges count each side of a trade - the buy and the sell - as two lots, meaning the total oil changing hands was 20,328 lots, equal to 20.3 million barrels.

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