De-Dollarization Accelerates: China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

Authored by Tsvetana Paraskova via OilPrice.com,

The world’s top oil importer, China, is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan, Nikkei Asian Review reports.

The crude oil futures will be the first commodity contract in China open to foreign investment funds, trading houses, and oil firms. The circumvention of U.S. dollar trade could allow oil exporters such as Russia and Iran, for example, to bypass U.S. sanctions by trading in yuan, according to Nikkei Asian Review.

To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.

Last month, the Shanghai Futures Exchange and its subsidiary Shanghai International Energy Exchange, INE, successfully completed four tests in production environment for the crude oil futures, and the exchange continues with preparatory works for the listing of crude oil futures, aiming for the launch by the end of this year.

“The rules of the global oil game may begin to change enormously,” Luke Gromen, founder of U.S.-based macroeconomic research company FFTT, told Nikkei Asia Review.

The yuan-denominated futures contract has been in the works for years, and after several delays, it looks like it may be launched this year.

Some potential foreign traders have been worried that the contract would be priced in yuan.

But according to analysts who spoke to Nikkei Asian Review, backing the yuan-priced futures with gold would be appealing to oil exporters, especially to those that would rather avoid U.S. dollars in trade.  

“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Alasdair Macleod, head of research at Goldmoney, told Nikkei.

Comments

sickavme (not verified) Manthong Sun, 09/03/2017 - 02:55 Permalink

Would be dumb to go thru with this.First of all, nobody knows how much gold china really has.Second of all, is china trustworthy? (pretty much know the answer to that one)... This little trick won't last long by itself... However, we just pushed russia to have a gander at joining china in this endeavor just for fuckin us over with this bullshit that the leftards are pulling.And once russia joins in, its all over... They will roll over like dominoes.

In reply to by Manthong

Manthong sickavme (not verified) Sun, 09/03/2017 - 03:28 Permalink

 
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China likely has 5 or 6 times Au what it admits to. But gold schmold….. If it is not backed up by the fantasy bits of crypto or the fantasy bytes of fiat, you ain’t got nothing but some barbarous relic hard metal asset that does not need electricity or a dictatorial government to determine its value. When the SHTF the poor saps who are filthy with gold and silver will be taught a thing or two.

In reply to by sickavme (not verified)

BennyBoy Manthong Sun, 09/03/2017 - 05:37 Permalink

 FED: We're dooooomed! The petrodollar is going down in flames!CIA: Must start war with China. How about using NK as a pretext?Afghanistan's border with China? Farkhor Air Base in Tajikistan? Release the US Air Base in Manas, Kyrgyzstan? Then the CIA could help the western part of China to break away. Genius!MIC: Bomb bomb bomb! But pay us with Yuan-Priced Crude Oil Benchmark Backed By Gold

In reply to by Manthong

Manthong sickavme (not verified) Sun, 09/03/2017 - 05:09 Permalink

 
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Cruf… I am stuck in a well-enforced bunker with gobs of preps ..and you tell me the dollar is losing value ????? F the bank of Israel and all of their banker sycophants.

In reply to by sickavme (not verified)

Dame Ednas Possum tmosley Sun, 09/03/2017 - 14:02 Permalink

Der! Like fucking price movement in PMs to account for demand you dolt. You need to take a chill pill fella and open that sleepy eye on your avatar. Your mindless obsession with cryptos is blinding you to common sense rationality... and it's nauseating. Anybody who has scored on BitCoin et al. over the last year or so is an utter fool if they don't cash-in 80-90% of their holdings immediately and pour it into real assets... especially PMs. 

In reply to by tmosley

chubbar StychoKiller Sun, 09/03/2017 - 09:32 Permalink

This is exactly correct, IMO. First, this isn't anything but what has already been announced months ago. China has set up their gold exchange to accept Yuan and is buying oil from Russia (and IRAN through Russia) with Yuan. The Exchange allows Russia/Iran to exchange their Yuan for gold, so essentially they are buying oil with gold because Russia/Iran have no reason to stockpile Yuan and will most likely convert Yuan to gold at the sale.Secondly, this isn't a problem UNLESS the demand for gold isn't reflected in its' price, which those of us who feel it has been suppressed through paper derivitives think is the case. Now, either the Chinese are rapidly approaching what they consider to be a reasonable hoard of gold so figure it's time to pull the curtain back on this scam, OR, they are merely getting ready for some future development and this just sets the table for that.I don't think either of those countries (Russia/Iran) were having issues sourcing gold for their oil through whatever exchanges they have access too. Iran has been going through Turkey for their gold unless that stopped recently.Now, if you see the Saudis announce they are selling oil for Yuan, then you have a new development that is notable. This action (article) may or may not be a catalyst for gold to break out of the manipulation. I think we are getting close though. 

In reply to by StychoKiller

chubbar chubbar Sun, 09/03/2017 - 09:39 Permalink

One afterthought. With China being the main proponent of "One Belt, One Road" trade initiative, the ability to exchange Yuan for gold or more importantly, Yuan for Oil (through China or directly with Russia) could be a major catalyst for those countries joining that trade deal (which are MANY) to ditch the dollar since they no longer need to hold dollars to buy oil for their country.This is most likely the concern of the US with this development. It certainly explains why Russia/Iran and to a lesser extent Syria (pipeline) are all of a sudden (relatively speaking) big threats to the US. In that regard, it may not matter all that much what the Saudis do.

In reply to by chubbar

Blankone chubbar Sun, 09/03/2017 - 09:47 Permalink

And what happened to the articles many months ago going back over a year that claimed Russia was unleashing an alternative to SWIFT that would allow everyone to avoid the dollar? Even this article says China "is preparing to launch a crude oil futures", as in it still has not been made operational.

In reply to by chubbar

Joiningupthedots JohninMK Mon, 09/04/2017 - 18:53 Permalink

I doubt very much Russia gives a rats ass what America thinks about its alternative SWIFT system.This is the problem with many of you. You dont understand (or refuse to believe) you cant threaten Russia with anything except sanctions really. Hot war and they wie you out in under 24 minutes and thats a military fact.There is no American unipolar rule anymore, Syria has proved that.Theres nothing America can do about alternative SWIFT, oil for Yuan etc its real and happening.Print as much Benjamins as you like but in the end they will be worth much the same as Brazilian or Argentine currencies....really they will!

In reply to by JohninMK

11b40 chubbar Sun, 09/03/2017 - 14:38 Permalink

Agree with part of your thesis, but not this one:"The Exchange allows Russia/Iran to exchange their Yuan for gold, so essentially they are buying oil with gold because Russia/Iran have no reason to stockpile Yuan and will most likely convert Yuan to gold at the sale."Both countries have need of consumer goods, as well as many other things that China, the world's largest factory, produces.  The Yuan they acept for oil gets recycled back to China for real goods, so I would say they plenty of use for trading in Yuan.

In reply to by chubbar

ThirteenthFloor localsavage Sun, 09/03/2017 - 09:38 Permalink

Oil needs to float down in relative value, and gold needs to float up in relative value to a more realistic valuations. Fiat of course & other hypothications (i.e., GLD and OIL) need displacement. In other words, each needs to find their real market value which is radically different that what it is today. I see no problem will oil trading 250 barrels trading to an ounce of gold... in fact seems closer to PMV. One will need a helluva lot of CNY and USD to get Gold.

In reply to by localsavage

ThirteenthFloor Mr 9x19 Sun, 09/03/2017 - 09:50 Permalink

True. But those have been weak (two bit) nations without very massive trade arrangements with US of A. War with China, mean wafers (chips) and PCBs used in all our computers ( including those in weapons and fucking Wall Street ) would be in short supply. Russia will align with China in the first four minutes of that war.

In reply to by Mr 9x19