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Vital for China to set up crude oil market to serve economy
By Richard Fu |
July 2, 2012, Monday
|
Print Edition
Print Edition
YANG Maijun
General manager, Shanghai Futures Exchange
There is an urgent need for China, which relies on imports for more than half of its petroleum needs, to establish a crude oil market.
The main purpose of such a market is to better serve the Chinese economy as the country has to buy a large amount of oil from the international market. A crude contract could help oil firms hedge their positions.
It's also essential for Asia Pacific to have a crude benchmark that can reflect the supply and demand fundamentals in this region, something that we don't have.
The Brent futures, the European benchmark for North Sea oil, are increasingly being seen as a global price reference since Brent started to trade at a premium to its US equivalent, West Texas Intermediate, last year.
That's in part because the US has been increasingly independent on energy supplies thanks to its achievement in unconventional oil and gas development. WTI has been increasingly seen a regional price and less referenced.
Therefore, we do need a price benchmark for Asia where economies are growing faster than the rest of the world.
Premier Wen Jiabao and the China Securities Regulatory Commission have made it clear the significance of the proposed crude futures on the Shanghai Futures Exchange. The launch of the crude contract will be the exchange's priority this year.
General manager, Shanghai Futures Exchange
There is an urgent need for China, which relies on imports for more than half of its petroleum needs, to establish a crude oil market.
The main purpose of such a market is to better serve the Chinese economy as the country has to buy a large amount of oil from the international market. A crude contract could help oil firms hedge their positions.
It's also essential for Asia Pacific to have a crude benchmark that can reflect the supply and demand fundamentals in this region, something that we don't have.
The Brent futures, the European benchmark for North Sea oil, are increasingly being seen as a global price reference since Brent started to trade at a premium to its US equivalent, West Texas Intermediate, last year.
That's in part because the US has been increasingly independent on energy supplies thanks to its achievement in unconventional oil and gas development. WTI has been increasingly seen a regional price and less referenced.
Therefore, we do need a price benchmark for Asia where economies are growing faster than the rest of the world.
Premier Wen Jiabao and the China Securities Regulatory Commission have made it clear the significance of the proposed crude futures on the Shanghai Futures Exchange. The launch of the crude contract will be the exchange's priority this year.
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