Earlier this year, China announced that they intend to create a competing gold market to the West by setting precious metal prices in the Yuan rather than the dollar. And in a new move announced on Sept. 9, the Shanghai International Energy Exchange appears to be planning a new oil futures market that will not only go head to head with the current Brent and WTI markets, but will be a direct attack against the petro-dollar system as they intend to denominate their contracts using the Yuan as the sole currency.
China’s energy markets have exploded after they signed a historic oil and gas contract with Russia to receive natural gas and petroleum from them over the next 30 years. And since that initial agreement took place, both Russia and China have agreed to bypass the dollar as the medium of exchange for the selling of this oil and gas, and instead transact their agreements using the Yuan.
China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.
Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources.
A Shanghai-based contract will compete in the crude futures market, which is worth of trillions of dollars and is dominated by two contracts, London’s Brent, seen as the global benchmark, and WTI, the key U.S. price. – Russia Today
Over the past three years China has accelerated their move towards ending the dollar as the singular reserve currency for international trade, and they have done this by replicating nearly every financial market and institution governed currently by the West. From the Asian Infrastructure Investment Bank to replace the functions of the IMF, to the BRICS Bank that works similar to the World Bank, their creation of a new gold pricing platform that is to be coupled with an oil futures market will provide the world economies a choice in whether to remain with the dollar standard, or move towards a more stable and direct currency to engage in trade with without having to use the global reserve as a middleman.
It is said that oil is the true global reserve currency, and that those who control the production, distribution, and pricing are the real masters of global finance. And ever since 1973 when the U.S. signed an agreement with OPEC to denominate oil sales in dollars, Washington has held sway over the global financial system. But now 42 years later, this hegemony appears to be finally breaking, and China is firing its strongest salvo in attempting to break the petro-dollar once and for all by setting up a new and competing market for the pricing of oil.