Shanghai Futures Exchange launches crude oil futures index
China on Tuesday marked the 1st anniversary of the trading of crude oil futures at the Shanghai Futures Exchange with the index launch, in the country’s pursuit of higher-level opening-up.
The index is based on the price movements and on the rate of return for the most actively traded contract for the crude futures at the Shanghai Futures Exchange, aiming to provide a clearer market reflection of the futures’ continuous trading to investors at home and abroad.
The Shanghai Futures Exchange began calculating the index based on futures trading during the night session of Monday and the index rose during Tuesday’s trading.
China launched the crude oil futures trading on March 26 last year. It was the first futures variety on the Chinese mainland open to overseas investors.
So far, over 40,000 accounts have been registered for the futures trading. Oil and chemical industry giants, commodity traders and investment companies are among the active traders.
According to the Shanghai International Energy Exchange (INE), a unit of the Shanghai Futures Exchange, it has registered 52 overseas agencies mainly from Hong Kong, Singapore, Britain, the Republic of Korea and Japan, which serve customers from Britain, Australia, Switzerland, Singapore, Cyprus, Seychelles, as well as Hong Kong and Taiwan.
By Monday, in terms of unilateral transactions, the total trading volume of Shanghai crude oil futures contracts at INE hit 36.7 million lots with a turnover of 17.12 trillion yuan (2.55 trillion U.S. dollars).
On average, the daily trading volume reached 151,000 lots, and a record maximum daily trading reached 359,786 lots, making China among the world’s most active crude oil futures trading markets.
The Shanghai Futures Exchange said Tuesday that it will develop a crude oil exchange-traded fund (ETF) in cooperation with stock exchanges, and will develop other new products.
James Shekerdemian, head of Prime Services for the Asia Pacific at Societe Generale Corporate & Investment Banking, said the company has been tracking the contract prices of Shanghai crude oil futures over the year.
The fast increasing trading volume of Shanghai crude oil futures indicated that the contracts had been highly recognized by the market, said Shekerdemian.
The crude oil futures closed higher Tuesday at the Shanghai International Energy Exchange (INE), with the most active crude oil contract for May delivery going up 3 yuan to close at 454.8 yuan a barrel.
Ding Jianping, head of the Center for the Study of Modern Finance at Shanghai University of Finance and Economics, said the launch of the crude oil futures index echoes a growing focus on China’s crude oil futures at home and abroad.
China is the world’s biggest crude oil importer. Since the launch of the Shanghai crude oil futures a year ago, futures contracts have been delivered seven times, with a total delivery volume of 7.2 million barrels. Related businesses such as trading, settlement, currency exchange, cross-border currency transfer, and delivery in bonds have been operated, which have promoted overseas energy companies’ participation in the China market.
Huang Yunzhi, an analyst with Industrial Securities Futures, said with the participation of multinational oil companies, oil traders and investment banks, Shanghai crude oil futures index can form a benchmark price reflecting the supply-demand situation in China and the Asia-Pacific region at large.
China International United Petroleum & Chemicals Co. Ltd. signed contracts based on the price of the Shanghai crude oil futures with Shell and Chambroad Petrochemical last March and October, respectively.
Jiang Yan, head of the Shanghai Futures Exchange, said Shanghai crude oil futures are interactive with peer contracts exchanged on the market of European countries and the United States. Transactions of WTI and Brent during the Asian trading period have turned more active since the launch of Shanghai crude oil futures.
With the experience of the crude oil futures trading, China has gradually opened the trading of iron ore futures and PTA futures to overseas investors.
Rochelle Wei, CEO of J.P. Morgan Futures Co. Ltd., said as China continues to open up its futures market and launch new varieties of products, the country’s market will play a more important role in the world market and more overseas investors will join in.