China Is About to Shake Up the Oil Futures Market

It’s taken a quarter of a century, but China finally has its own oil futures. At 9 a.m. local time on Monday, crude contracts began trading on the Shanghai International Energy Exchange. Futures for September settlement opened at 440 yuan a barrel, up from a reference price of 416 yuan. The world’s biggest oil buyer is offering yuan-denominated futures that foreigners can buy and sell -- a first in Chinese commodities. Among the most intriguing questions is whether the traditional benchmarks of Brent crude in London and West Texas Intermediate in New York will face a serious challenger. Here are some of the other key questions.

Futures trading would wrest some control over pricing from the main international benchmarks, which are based on dollars. Denominating oil contracts in yuan would promote the use of China’s currency in global trade, one of the country’s key long-term goals. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts.