Monday, May 14, 2018

Trump's tearing up of Iran deal could backfire by opening up more nations to trade oil in China's new Yuan denominated market

With President Trump announcing last week that the U.S. was pulling out of the 'Iran Deal', and subsequently threatening economic sanctions against any and all countries that continue with the agreement, the U.S. may have inadvertently shot themselves in the foot as this aggression may have provided an opening for faster expansion in China's new Yuan denominated oil market.

Washington’s renewed sanctions on Tehran supports China’s newly established oil futures, analysts say. The sanctions can make the yuan a more preferable currency than the dollar on the oil market. 
Since their launch in May, the interest in the renminbi-backed oil contracts has steadily surged. Traded daily volumes hit a record 250,000 lots last Wednesday, and the share of yuan contracts in global trading jumped to 12 percent compared to eight percent in March. 
“The contract is thundering into action,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, as quoted by Reuters. “It makes sense for Iran to begin selling oil under contracts denominated in yuan rather than dollars.” 
“The sanctions... can potentially accelerate this process of establishing a 3rd (oil) benchmark,” said senior vice president for derivatives in Singapore at financial services firm INTL FCStone, Barry White. - Russia Today


Post a Comment