The Shanghai Futures Exchange on Tuesday publicly released its crude oil futures price index. The release comes exactly one year after China's crude oil futures opened on the same exchange.
As of the end of February, the Shanghai International Energy Exchange (INE) had recorded more than 22,700 clients for crude oil futures trading, with more than 40,000 accounts. Over the past year, the INE market has made five deliveries for clients both at home and abroad, and observers say it is setting a good example for China's other internationalizing capital markets.
The INE crude oil futures allow both domestic and international traders to make price bids at the same time, carry out crude deliveries, and deal with foreign exchange issues.
"It's a good test bed for other sorts of capital markets when it comes to opening up more to foreign investors," said Li Liuyang, the chief analyst from China Merchants Bank.
As of Monday, the combined turnover of the INE crude oil futures stood at nearly 36.7 million lots, with a total value of 17.1 trillion yuan. According to market data, its trading price relationship with the WTI, Brent and Oman crude futures was at 89 percent, 94 percent and 97 percent, respectively, for 2018, indicating a stable connection to overseas markets. Daily price fluctuations were within 7.5 percent for the past year, while other international trading platforms have sometimes shown more than 10 percent volatility.
Industry observers said that Shanghai's crude oil futures act as an effective tool for many domestic manufacturers to hedge risks in the volatile global crude market. China International United Petroleum & Chemicals signed contracts last year with Shell and Chambroad Petrochemical, at prices based on the INE crude futures.
The INE crude futures price serves as an extra reference for many companies, said Jiang Mingde, chief consultant of Yixiweiye Fund. "The actual delivery rate is more than 42 percent. That means there are a lot of domestic producers using this futures trading platform to support their manufacturing businesses. It is a good example of how the capital market can support the real economy," he continued.
The INE is expected to launch more flexible tools to attract foreign investors, including a crude oil ETF, within the year. The most active crude oil contract for May delivery was up 0.7 percent, closing at 454.8 yuan a barrel on Tuesday.