China aims for pricing power in launching crude oil futures

China could well be on its way to the launch of the country’s most significant commodity futures as the Shanghai Futures Exchange has started vetting applications from brokerages to conduct crude oil futures business.

The long-awaited crude oil futures contract is likely to make its trading debut in the next few months, as regulators and exchange officials are putting final touches on the trading system with simulated trading already underway.

By the end of May, 92 members have been accepted by the Shanghai International Energy Exchange to offer brokerage services to crude oil futures traders.

In the next phase, the energy exchange will continue to review warehouses, custodian banks and inspection organisations before certifying them to offer related services to participants in crude oil futures trading, it said in a statement.

The energy exchange, a wholly-owned subsidiary of the Shanghai Futures Exchange with a 5 billion yuan (US$735.2 million) investment, was established in the Shanghai free-trade zone in 2013.

Sources with knowledge of the preparations for the yuan-denominated crude oil benchmark said an official launch would take place in the second half of 2017.

“It will be more than a milestone in China’s futures market when the contract starts trading,” said Huang Lei, an independent commodity futures analyst. “But those who expect the contract to become an Asia benchmark might feel disappointed.”