China’s Crude Oil Futures Have Never Been So Expensive
Yuan-priced crude futures in China rallied to the highest level on record, as the shutdown of an oil pipeline in Saudi Arabia hurt global supplies and refiners in the largest importer bought more cargoes.
Prices advanced to as much as 929.4 yuan ($138.50) a barrel on the Shanghai International Energy Exchange. That’s the highest in data going back to 2018, when the contract was first listed. The Chinese marker tends to track trends seen in benchmarks for similar-quality crudes, with both Oman and Murban futures last trading above $126 a barrel.
Global oil contracts priced in US dollars such as Brent have rallied to multi-month highs in recent sessions following the disruptions to Saudi pipeline flows, further signs of instability across the Middle East, and no signals from the US or Iran that they are ready to back down in their conflict. The advances have also been supported by increased buying activity by Chinese processors.
“Chinese refineries are currently the marginal buyers of crude oil, purchasing crude at high premiums and high freight rates, which has kept Shanghai crude relatively strong compared with overseas benchmarks,” researcher Chaos Ternary Futures Co. said in a note. “In the medium term, only a recession or a de-escalation in geopolitics can cool down oil prices.”
The oil contract in Shanghai is underpinned by a wide array of medium-sour crudes that have been delivered to local storage facilities. The means, in addition to the commodity itself, prices also reflect freight costs, which have spiked recently.
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