Monday, July 23, 2018

Yuan denominated oil contract no flash in the pan as it continues to take market share from London and Chicago

When China launched its yuan-denominated oil futures contract back in March of this year, they proved very quickly that an alternative to the Petrodollar was both wanted and needed by the global community.  And this was shown by the fact that on the very first day of trading, the new yuan-denominated futures contract had more single day volume than an average day for the London-Brent market.

Two months later, this Chinese led Petroyuan had risen to consume 12% of the global futures market and this appears to simply be the beginning as a new chart updated for July shows that market share for the yuan in the oil market is still continuing to grow.

It began operations in March of this year "with the clear intention of having less dependence on the US currency, which has greater strength and negotiating capacity in the energy price of the market," industry analysts highlight its relevance to China, Russia, Iran and even Venezuela.
A recent report by SaxoBank shows that just 17 weeks after its launch, the petroyuan continues to take a share in the Brent and WTI crude market, even though its trading hours are much shorter.
Its average market share of four weeks rose above 11% last week, and has been setting maximum levels in its use, as seen in the attached image. (see yellow area) - Valoraamalitik
While the numbers today may be small in comparison to the 40+ year reign that both Brent and WTI have had over the global oil markets, all one has to do is look at how China captured the global gold sector in just a few short years following their creation of a yuan-denominated gold contract, and their subsequent move to become the world's largest physical gold market.

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