China will import petroleum into the domestic yuan instead of the dollar

Shanghai August 31, 2018 (HSP / Photo: TASR / AP- Maran Tankers)

Since September, five companies will ship oil via the Shanghai International Oil Exchange (INE), the first steps for the first Chinese oil index on the global market

Illustration photo

According to Reuters, this deal will include 600,000 barrels of oil from the Middle East, with which five companies, including Unipec and Zhenhua Oil, will trade via INE. China, the largest oil importer in the world, wants the new index to develop into a third global index comparable to London Brent and the American West Texas Intermediate (WTI).

Unipec within the largest Asian refinery Sinopec Corp. is to deliver about 200,000 barrels of Iraqi oil from Basra to Sinopec storage tanks on Cez Island in the eastern province of Ceyang. In addition, CNPC Fuel Oil and Zhenhua Oil will supply 100,000 barrels from Basra to the South China port of Zhanjiang and Chinaoil will ship 100,000 barrels of Oman oil to storage tanks in the city of Dalian in northeastern China.

Oil prices adds that preparations for the oil supply and trade have already started in March to give stakeholders time to collect stocks that will take place in September when they trade at the Shanghai INE exchange.

The deliverability, the volume and the smooth process are the key to achieving China's ambition to trade oil, not in dollars, but in domestic yuan. It is still not clear who will determine the oil in question, or which companies will have to buy it, but that must be shown at the start of trading.

Analysts in one direction are having problems with high storage costs in China, which are much higher than elsewhere, because the availability of storage capacity is limited and the requirement that the load must be stored in a certain storage facility before it is available. In addition to storage, buyers with import quotas must also be found and expensive domestic transport can also be remedied.

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