In Unprecedented Move, China Plans To Pay For Oil Imports With Yuan Instead Of Dollars

[DamianTV]

https://www.zerohedge.com/news/2018-03-31/china-plans-pay-oil-imports-yuan-instead-dollars

Just days after Beijing officially launched Yuan-denominated crude oil futures (with a bang, as shown in the chart below, surpassing Brent trading volume) which are expected to quickly become the third global price benchmark along Brent and WTI, China took the next major step in the challenging the Dollar's supremacy as global reserve currency (and internationalizing the Yuan) when on Thursday Reuters reported that China took the first steps to paying for crude oil imports in its own currency instead of the US Dollars.

https://www.zerohedge.com/sites/def...p/public/inline-images/2018-03-26_5-47-22.jpg

A pilot program for yuan payment could be launched as soon as the second half of the year and regulators have already asked some financial institutions to "prepare for pricing crude imports in the yuan", Reuters sourcesreveal.

According to the proposed plan, Beijing would start with purchases from Russia and Angola, two nations which, like China, are keen to break the dollar’s global dominance. They are also two of the top suppliers of crude oil to China, along with Saudi Arabia.

A change in the default crude oil transactional currency - which for decades has been the "Petrodollar", blessing the US with global reserve currency status - would have monumental consequences for capital allocations and trade flows, not to mention geopolitics: as Reuters notes, a shift in just a small part of global oil trade into the yuan is potentially huge. "Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year." Currently, virtually all global crude oil trading is in dollars, barring an estimated 1 per cent in other currencies. This is the basis of US dominance in the world economy.

However, as shown in the chart below which follows the first few days of Chinese oil futures trading, this status quo may be changing fast.

https://www.zerohedge.com/sites/def...op/public/inline-images/china oil trading.jpg

Superficially, for China it would be a matter of nationalistic pride to see oil trade transact in Yuan: "Being the biggest buyer of oil, it’s only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market,” said one of the people briefed on the matter by Chinese authorities.

...

Well thats not gonna have any impact on the Petro Dollar at all...

 

[Intoxiklown]

https://www.zerohedge.com/news/2018-03-31/china-plans-pay-oil-imports-yuan-instead-dollars



Well thats not gonna have any impact on the Petro Dollar at all...

I've been following this fairly closely as well. I actually find it a fun mental exercise wondering if increased US production (even though we're still a net importer) of crude was a proactive move geo-politically to hedge American energy protection, or a "band-aid on a gun shot wound" for voters that will have the unintended consequence of driving OPEC to China speeding up the demise of the Petro-Dollar.

But being that China is the largest importer globally of oil as well as 42% of the global trade market? I can appreciate just how profound your lone comment on your posted article is.

 

[oyarde]

So , is china still the largest global oil importer ? If so , what percentage of the total global market is that oil ?

 

[Intoxiklown]

So , is china still the largest global oil importer ? If so , what percentage of the total global market is that oil ?

Yeah, they surpassed the US by just shy of 1 million barrels per day (due to more US supply state side). They're around 55% or so of OPEC nation's business which has declined some as it was higher prior to some deals with both Russia and Brazil, but their demand is steadily rising. China imports around 18% of global oil sold to foreign nations with the US being a few decimal points above 16%ish

 

[oyarde]

Yeah, they surpassed the US by just shy of 1 million barrels per day (due to more US supply state side). They're around 55% or so of OPEC nation's business which has declined some as it was higher prior to some deals with both Russia and Brazil, but their demand is steadily rising. China imports around 18% of global oil sold to foreign nations with the US being a few decimal points above 16%ish

So 18 and rising we can just call it 20 . That is about the number it would need to be to be significant to the dollar I guess . Interesting

 

[Zippyjuan]

http://www.worldstopexports.com/crude-oil-imports-by-country/

Below are the 15 countries that imported the highest dollar value worth of crude oil during 2016:

China: US$116.2 billion (17.3% of total crude oil imports)
United States: $108.1 billion (16.1%)
India: $60.9 billion (9.1%)
Japan: $50.8 billion (7.6%)
South Korea: $44.2 billion (6.6%)
Netherlands: $29.3 billion (4.4%)
Germany: $28.7 billion (4.3%)
Italy: $18.9 billion (2.8%)
Spain: $18.7 billion (2.8%)
France: $17.9 billion (2.7%)
Thailand: $15.2 billion (2.3%)
Singapore: $15.1 billion (2.2%)
United Kingdom: $14.3 billion (2.1%)
Taiwan: $12.9 billion (1.9%)
Belgium: $11.5 billion (1.7%)

The listed 15 countries purchased 83.8% of all crude oil imports in 2016 (by value).

None of these top importers experienced a boost in the value of their crude oil purchases from 2012 to 2016.

Among the above countries, the fastest-declining crude oil importers since 2012 were: United Kingdom (down -70.1%), Japan (down -66.8%), Italy (down -66.8%) and the United States (down -66.4%).

Also worth noting that the US imports some oil to be refined here and the products resold to other countries- it isn't just for our own consumption. We are the #1 exporter of refined oil products.

 

[Intoxiklown]

So 18 and rising we can just call it 20 . That is about the number it would need to be to be significant to the dollar I guess . Interesting

Yeah.

Now, there is a weird variable to that though. Part of China's ramp up with demand means an 80% increase from American oil as compared to where it is now. But how that will affect things....I've no clue.

 

[Intoxiklown]

http://www.worldstopexports.com/crude-oil-imports-by-country/



Also worth noting that the US imports some oil to be refined here and the products resold to other countries- it isn't just for our own consumption. We are the #1 exporter of refined oil products.

Yeah...that's what I was getting at as well with my previous post

 

[Zippyjuan]

The US was prohibited from exporting oil to anybody until fairly recently and has been increasing exports to China. They buy about from us about ten percent of what they buy from OPEC but that is rising. Their purchases from Saudi Arabia have been declining.

http://www.livetradingnews.com/us-oil-exports-china-narrows-trade-deficit-73638.html#.WsExHYjwaUk

US Oil Exports to China Narrows Trade Deficit

Few expected China to become a major buyer of US Crude Oil

Now, data in Thomson Reuters Eikon shows US Crude Oil shipments to China went from nothing before Y 2016 to a record 400,000 BPD in January, worth almost $1-B. Additionally, half a million tonnes of US Liquefied Nat Gas (LNG) worth almost $300-M, headed to China from the US in January.

The US supplies will help reduce China’s huge trade surplus with the US.

“With the Trump administration, the pressure on China to balance accounts with the U.S. is huge… Buying U.S. oil clearly helps toward that goal to reduce the dis-balance,” said the CEO and co-Founder of commodity trading house Mercuria.

As the energy exports rose, China’s January trade surplus with the United States narrowed to $21.895-B, from $25.55-B in December, according to official Chinese figures released Thursday.

The energy sales to China are still modest compared with the $9.7-B of Crude Oil shipped by the Organization of the Petroleum Exporting Countries (OPEC) to China in January.

“We see U.S. crude as a supplement to our large base of crude” from the Middle East and Russia, said a refinery manager for China’s Oil-major Sinopec (NYSE:SHI), declining to be named as he was not cleared to speak to media.

He said that Sinopec was looking to order more US Crude Oil this year.

China’s Crude Oil imports climbed to a record 9.57-M bbl in January, official data showed Thursda

US Crude Oil imports have fallen below 4-M BPD Vs a record 12.5-M BPD in Y 2005.

At average December/January volumes, American oil and gas sales to China would be worth around $10-B a year, including exports to Japan, South Korea and Taiwan, the figure 2X’s.

For Chinese buyers, the main attraction of US Crude Oil has been its price. Thanks to the shale boom, US Crude Oil is cheaper than Crude from elsewhere.
At around $60.50 bl, WTI Crude Oil is currently some $4 cheaper than Brent Crude , off which most other Crude Oils are priced.