Oil exchange set to reopen
The Shanghai Oil Exchange will soon restart operations, allowing oil products to be traded through an organised exchange for the first time since it was shut in 1995, but futures contracts will not be allowed.
'It will open very soon,' said Fu Chengyu, chairman of China National Offshore Oil Corp and its red chip subsidiary CNOOC, speaking on the sidelines of the National People's Congress.
The oil company is a founding shareholder of the exchange.
Mr Fu declined to say when the exchange would reopen or what products would be available for trade. But he said the five founding shareholders would each hold similar stakes in the exchange as previously, or about 20 per cent each.
Previous media reports said the shareholders included China National Petroleum Corp (CNPC), parent of PetroChina; China Petrochemical, parent of China Petroleum & Chemical; China National Chemicals Import and Export Group, parent of Sinochem Corp; and Shanghai Jiulian Group. Products to be traded include crude oil, refined oil and fuel oil.
CNPC chairman Ma Fucai, also an NPC delegate, said only forward contracts would be traded on the exchange, while futures contracts which would allow hedging would not yet be available.
'It's not a real futures exchange as trading will be subject to limitations, such as you must have the inventory on hand in order to trade,' Mr Ma said. 'The establishment of a full-fledged oil exchange is a process which has just begun.'
Futures contracts can be traded without the need to deliver the actual product, allowing speculative trading in addition to normal business hedging.
In contrast, forward contracts can be traded in private between two parties who can agree on a settlement time but one party must deliver and the other receive.
Set up in 1993, the Shanghai Oil Futures Exchange was closed down after two years after rampant speculation by financial institutions left some in trouble.
