China may establish oil exchange - Financial Times, September 25
China may establish an exchange for trading oil on both the spot and futures markets in an effort to smooth out the sharp price fluctuations caused by recent rising energy costs.
The policy shift, detailed in the official China Daily Business Weekly yesterday, reflects the Beijing government's increasing efforts to make greater use of the market in setting prices.
The article quoted two analysts from the country's most influential state-backed energy think-tanks, both urging the establishment of the exchange.
"The oil exchange, especially futures transactions, can help oil and fuel producers and buyers analyse market trends, fine-tune prices and reduce risks," said Yang Jingmin of the Development Research Centre, a think-tank under one of the country's largest oil companies, the China National Petroleum Corporation.
China has set prices for both crude and refined oil products according to world prices over the past year, using prices set in commodity trading in Singapore as its benchmark.
That has seen the ex-refinery price of petrol rise 54 per cent since November and diesel prices increase by 46 per cent.
The rises in pump prices prompted a short strike by taxi drivers in Beijing in July, prompting the city government to offer a small subsidy to calm them down.
An oil exchange was established in Shanghai and Beijing in 1993, but closed down in 1995 when it attracted too much speculative trading.
The revival of the exchange now is consistent with a range of far-reaching reforms forced on China since it became a net oil importer in 1993, including the partial privatisations of the country's three leading oil companies.
Chinese oil industry analysts said last night the government might delay forming an exchange until two sensitive overseas listings have been made.
Sinopec, China's dominant petrochemical company, will be listed next month, while China National Offshore Oil Corporation (CNOOC), predominantly an exploration company, is being prepared to go public early next year.
With a great deal riding on successful listings, they analysts said the government may not wish to rush reforms on another front at the same time.
However, Petrochina, an upstream exploration and production company that listed earlier this year, is understood to back the establishment of an exchange. |
