Light, sweet crude oil prices fell modestly on the New York market Mar. 26 but closed above $65/bbl while Brent crude oil for May delivery on the London market also fell modestly but settled above $70/bbl for a second consecutive trading session.
Meanwhile, China launched a new crude oil exchange, the Shanghai International Energy Exchange, that could establish an Asian oil price reference and might eventually serve as a crude oil benchmark outside the US and European benchmarks.
The new exchange is based on the yuan rather than the US dollar, which dominates the other oil markets. Trading on the Shanghai International Energy Exchange started Mar. 26.
China imports about 10 million b/d of oil, making it the largest oil importer. China’s imports are expected more than any other country, said Sushant Gupta, Wood Mackenzie Ltd. research director.
“We expect China’s crude import requirements to grow by about 2.1 million b/d from 2017 to 2023,” said Gupta. “Rightly so, China would want to play a more active role in influencing the price of crude oil.”
Crude suppliers, especially Middle Eastern and US producers, will want to ensure their crude prices to China remains competitive with China’s marker grades, Gupta said.
“Once established, China’s reference crude prices could also act as a regional benchmark for negotiations of spot or term crude oil prices in other markets, such as Japan and South Korea. There is a precedence from the iron ore and coal markets where China’s domestic prices and importing patterns are now treated as reference points for the industry.”
Gupta said China’s oil benchmark relative to international prices could provide new arbitrage opportunities for traders over time.
Energy prices
The May light, sweet crude contract on the NYMEX fell 33¢ on Mar. 26 to settle at $65.55/bbl. The June contract declined 30¢ to $65.41/bbl.
The NYMEX natural gas price for April gained nearly 3¢ to $2.62/MMbtu. The Henry Hub cash gas price rose 2¢ to $2.58/MMbtu on Mar. 26.
Ultralow-sulfur diesel for April decreased less than 1¢ to remain at a rounded $2.02/gal. The NYMEX reformulated gasoline blendstock for April fell 2¢ to $2.01/gal.
Brent crude oil for May was down 33¢ to $70.12/bbl on London’s International Commodity Exchange. The June contract was down 29¢ to $69.52/bbl. The gas oil contract for April was $612.75/tonne, up $1.75.
The Organization of Petroleum Exporting Countries’ basket of crudes was $66.80/bbl on Mar. 26, up 41¢.
Contact Paula Dittrick at [email protected].
