Oil briefly hits US$71, with United States supply, Middle East in focus

Weekly Oil Markets Recap - Running Out Of Toilet Paper

China launches first ever yuan-denominated oil futures contract; posts more than 6% jump

The crude futures are being traded on the Shanghai International Energy Exchange, a 5 billion yuan subsidiary set up by the Shanghai exchange in the city's free-trade zone in late 2013.

China has launched yuan-dominated crude oil futures, a major step in Beijing's years-long push to win greater sway over oil.

Within minutes of the launch, the price had gone up to nearly US$70.85 (447 yuan) from a starting price of US$69.94 (440.4 yuan) per barrel.

The Brent North Sea benchmark was above the $70 Dollars on Tuesday for the third day in a row and stood at $70.42 USD a barrel, while the West Texas Intermediate was posted at $65.73 a barrel. Both futures contracts are commonly used by financial traders.

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

The first ever yuan-denominated crude-oil futures had a successful first day of trading yesterday, as China looks to expand its influence in the Asian oil sphere by establishing a new local benchmark. "With this launch, the market will pay more attention to China's demand story". "Refinery maintenance is in full swing", causing "big builds in crude-oil stocks and big draws in products", he said.

Despite this, there were concerns over regulatory interference, as seen in other Chinese commodities like iron ore and coal.

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Brent has risen by more than 5 percent this month while WTI is up over 4 percent. Such obstacles kept foreign investors away from the major stock and bond markets in the mainland.

Then there are the bulls, such as hedge fund manager Adam Levinson, who says the start of "petro-yuan" would be a "huge story" and increase the use of the Chinese currency in trade settlements.

In Asia, crude oil is mainly priced against the Dubai, Oman and dated Brent benchmarks or Oman crude futures on the Dubai Mercantile Exchange.

With one eye on success, the authorities are also wary of any potential bubbles created by the millions of wealthy retails investors living in the world's second-largest economy.

The jump came after Brent futures for May delivery opened above $70 per barrel for the first time since January on expectations OPEC-leader Saudi Arabia may extend supply cuts into 2019, as well as over concern that the United States may re-introduce sanctions against Iran.

"The trade war story should be taken into account when trying to quantify the potentially bullish effect of the geopolitical element in oil markets", said analysts at consultancy JBC Energy.

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