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Fuel-oil Futures to be Launched in Shanghai

Shanghai Futures Exchange, one of the country's three futures exchanges, said Friday it hoped to launch fuel-oil futures trading this year.

Jiang Yang, general manager of the exchange, revealed at its annual work meeting yesterday that trade in fuel-oil futures would be an "initial step" towards the launch of oil futures which also cover other products like crude, diesel and petrol.

Jiang said negotiations with the three largest Chinese oil companies -- the China National Offshore Oil Corp, China National Petroleum Corp and Sinopec -- and relevant government bodies over fuel-oil futures trade has basically been completed.

"Now we are waiting for a final approval (by China Securities Regulatory Commission)," said Jiang.

"We hope to launch it as soon as possible, and preferably within the year."

Compared with crude oil, fuel oil in China is much more market-driven, with prices closely pegged to the international market.

Pan Zhengyan, a finance expert with Shanghai Academy of Social Sciences, said oil futures, in the long run, would help ensure a stable oil price in the domestic market and contribute to the nation's strategic oil reserves.

But Pan also cautioned against market speculation in oil futures market.

China opened oil futures exchanges in 1993 in Beijing and Shanghai but closed them two years later after an industry overhaul.

Shanghai Futures Exchange also confirmed Friday that the new contract for long-grained paddy futures would be launched this year.

In addition, the exchange aims to establish financial futures in the following years.

"Though the timetable is not set yet, we have decided to concentrate our efforts on stock index futures and treasury bonds futures first,'' said Jiang.

China needs index futures to help traders hedge risks and stimulate trading, analysts said.

Institutional investors are particularly interested in index futures, as the stock markets dropped dramatically in 2001 and last year.

Financial futures products, a long-term aim of Shanghai Futures Exchange, will also help the city achieve its status as the country's financial centre, said Jiang.

Jiang said Shanghai Futures Exchange started researching financial futures nearly two years ago.

More than 24 million deals were struck at Shanghai Futures Exchange last year, a year-on-year increase of 117 per cent.

The exchange's total turnover last year reached 1,640 billion yuan (US$198 billion), increasing 92 per cent over the previous year and accounting for 42 per cent of the mainland's total.

Currently, the mainland has only three futures exchanges, in Shanghai, Zhengzhou and Dalian, trading a handful of commodities such as copper, aluminium and natural rubber.

Source: ChinaDaily 2003.05.30