Reuters - China taking first steps to pay for oil in yuan this year - sources

This is news that needs to be noted. Recently China launched new oil futures contracts trading in Yuan which many viewed as just one more effort to bypass the US dollar. How much impact the new "petro-yuan" contracts will have has been much debated.

Now we have Reuters reporting that three sources (not identified) are saying that later this year China plans to start using Yuan to buy the oil it imports. This could be viewed as a more significant effort to displace US dollars with Chinese Yuan and will need to be watched this year. Below are excerpts from the Reuters article (I added the underline and bold type for emphasis).

------------------------------------------------------------------------------------------------------------------
"China is taking its first steps towards paying for imported crude oil in yuan instead of the U.S. dollar, three people with knowledge of the matter told Reuters, a key development in Beijing’s efforts to establish its currency internationally.

Shifting just part of global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year.

A pilot program for yuan payment could be launched as early as the second half of this year, two of the people said."

Please click here and read this full article on Reuters

----------------------------------------------------------------------------------------------------------

My added comments: The article goes on to say that China could start up this program first with Russia and Angola and adds:

"Both Russia and Angola, like China, are keen to break the dollar’s global dominance. They are also two of the top suppliers of crude oil to China, along with Saudi Arabia."

It should be noted that the three sources cited here are not willing to go on the record with this information which suggests to me this may be a politically sensitive issue. Someone clearly wanted Reuters to report this, but no officials in China are willing to confirm it so far or provide much detail.

I have also seen a number of articles suggesting that China will eventually demand that Saudi Arabia accept yuan in payment for oil. All of this needs to be monitored especially given the apparent "trade war" that seems to be ramping up between the US and China. Not to mention we have the potential for a summit on North Korea with both the US and China involved. 

It is hard to tell how all the cards now being played between China and the US may or may not be related to the big picture maneuvering by each side (what is real, what is a bluff, etc). But it is news we should follow this year.