Oil Market on Verge of Historic Move
Traders are preparing themselves for a historic event over the coming months as China readies for the launch of crude oil futures priced in RMB. The contract will be convertible to gold, meaning that traders will be able to settle crude oil purchases in RMB Yuan and then convert the RMB Yuan into gold on exchanges in Hong Kong and Tokyo. This will be the first time that traders will be able to settle crude oil futures trade without needing USD’s and marks the beginning of the shift away from USD as the global reserve currency.
RMB Yuan Crude Oil Futures, Awaiting Final Regulatory Approval
China has been developing RMB Yuan based currency exchange operations over several years and has been preparing to launch crude oil futures, but the plan was delayed due to a severe crash in Chinese equities over summer 2015 which wiped 40% of companies’ value. However, speaking to Caixin last week, Jiang Yan who is CEO of the Shanghai Futures Exchange said that the crude oil futures offering is under review and awaiting final regulatory approval.
34 Global Central Banks Agree to Bi-Lateral Currency Swap
The Brookings Institute reports that 34 global Central Banks have opted into bi-lateral currency swap agreements with the PBOC as of Q3 2016, including major oil producing nations. These agreements mean that these countries will be able to deal directly with China as well as other crude oil exporters using RMB Yuan to settle transactions which can then be converted into physical gold. This will be a significant draw for countries who wish to avoid using US Dollars which have been used to quote and trade OPEC Crude Oil since 1973.
Read more: https://www.orbex.com/blog/2017/09/china-to-launch-rmb-crude-oil-futures-threatening-usds-global-reserve-currency-status