China Crude Oil Futures Face Uphill Struggle

摘要

BMI View: The launch of the Chinese crude oil futures contract faces significant barriers to uptake. However, the long-term potential of the contract is substantial, given the scale of the domestic Chinese market. On March 26, the Shanghai International Energy Exchange (INE) will launch a crude oil futures contract. Beijing hopes to foster the development of a large, liquid benchmark for the Asia-Pacific region. Although mature benchmarks exist in both Europe and North America, neither can fully reflect the supply and demand dynamics distinct to Asia. With China, India and South East Asia set to drive the bulk of demand growth over the coming decade, the INE contract could play a key role in the global oil market. If implemented effectively, the benchmark could increase transparency, improve price discovery and allow regional players to better manage their risks. From Beijing's perspective, it would also support efforts to liberalise its energy sector and shift towards the use of more marketbased mechanisms.