Following an article in the Nikkei Asia Review, which reported China will shortly introduce an oil futures contract priced in yuan, there has been some confusion about what it means. The article pointed out that in combination with existing gold futures priced in yuan, an oil exporter to China contracting to accept yuan could use these two futures contracts to take delivery of physical gold in payment for oil.
I was quoted in that article as follows:
“It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,”i
The mechanism of introducing an oil for yuan contract could hardly be clearer, yet the rumour mill went overtime into Chinese whispers. Some analysts appeared to think China was authorising a new oil for gold contract of some sort, or that China would be supplying the gold, both of which are untrue.
This post was published at GoldMoney on October 12, 2017.
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