Saturday, March 24, 2018 -- Will China's New Oil Futures Flop?

With the new Yuan based oil futures contracts set to open trading on Monday March 26th, Irina Slav pens this new article in asking if one problem related to how these contracts work will cause them to fail. Below are excerpts from her article.

"This week will see a historic event: on March 26, trading will begin in yuan-denominated crude oil futures contracts on the Shanghai International Energy Exchange. The futures launch is historic because it will be the first time that foreign traders will have access to a Chinese commodity market. It is also historic because the yuan oil futures have been in the making for years, but have been delayed time and again.

. . . . .

China last year became the world’s top oil importer, and this year it will likely keep the crown. The time is as ripe as it will ever be for the launch of the futures, and China is now trying to make sure that volatility will not be excessive. This, however, could compromise the success of the futures.

. . . . . . . .  only time will tell if the bigger goal could be achieved: displacing the dollar as the one and only petrocurrency in the world, part of Beijing’s strategy of advancing the country’s global influence by making the yuan an international currency."

Please click here to read the article to find out the specific problem she mentions

My added comments: Many people are watching this new futures contract to see what kind of impact it may have on the so called "petro-dollar".  Some think it will be the start of the end of the US dollar as the global reserve currency. Others think this event will have little impact on the US dollar any time soon. Anything that did disrupt the US dollar as global reserve currency would be viewed as significant news here and relevant to potential monetary system change, so we will follow this event over time.

What we do here is follow news and events and report what actually happens which is much more important than what various people predict is going to happen. Readers can then assess how various predictions panned out versus what actually happened.

Added note: Judy Shelton tweets out a link to a Wall Street Journal article on the potential impact of the new petro yuan contracts. A lot of people are following it and there is a wide variety of opinion on the potential impact.

News notes from first day of trading: Reuters runs this article on the first day of trading and Zero Hedge reports that over 23,000 contracts trade in the first hour which they described as "significant demand".  Dr. Stephen Leeb offers his pro China views on the situation in this article.

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