China to Reopen Oil Trade

Chinese oil companies will resume activities at the oil trading centre in Shanghai this year, a move that further liberalizes the once tightly controlled oil market.

The centre will trade forward contracts for refined oil products, including gasoline, diesel oil, kerosene and fuel oil. Daily trading volumes could reach 80,000-100,000 tons a day.

The centre hopes to play a role in influencing oil prices on the regional, or even global market. China opened oil futures exchanges in 1993 in Beijing and Shanghai, trading crude oil, gasoline, diesel and fuel oil. They were closed two years later due to an industry overhaul and partly because of rampant speculation.

Unlike previous futures exchanges, the new trading centre will not trade oil futures, which are more standardized and strictly regulated.

Instead, the centre will be a sort of spot market. Members are required to trade their forward contracts only when they hold real products in an attempt to avoid speculation risks. Short selling and buying will be prohibited.

In the initial phase, the centre hopes to attract about 100 members, including oil producers, users and traders, to participate in trading.

Experts say the significance of the trading centre is that it helps the market, rather than the government, decide the price of oil products.