Tuesday 27 March 2018

The PetroYuan takes off with a hiss and a roar

While the media obsesses with a porn star this 'news of a generation' goes UNREPORTED in the world media.

I don't disagree with the following:

"Sources in the Intelligence Community (IC) are saying this may be related to the "PetroYuan" launched by China to buy and sell OIL in Yuan instead of Dollars. The "PetroYuan" went LIVE last night, and in the first hour of trading, TEN BILLION DOLLARS of notional trading took place.

"For decades, all oil sales in the world HAD to be performed using Dollars. This meant that countries around the world needed physical US Dollars to buy oil. With a new way to now purchase oil using the Chinese Yuan currency, a whole slew of US Dollars are going to flood back into the USA from countries that don't want our currency anymore and who have resented having to use it.

"When all that cash starts coming back into the USA, it will cause almost immediate hyper-inflation, wrecking the value of the Dollar, and collapsing the US economy.

"THAT is something countries go to war to prevent . . .

"This fits the situation when one sees that the US has been deliberately conducting "freedom of navigation" exercises in the South China Sea, ignoring the artificial islands created by China and the new "territory" claimed by those islands.

"Last week, China's President Xi Jinping, said "China is ready for a bloody battle" over what they claim is their "Sovereignty" in that region.

"China is part of the BRICS economic group: Brazil, Russia, India, China and South Africa. Those countries collectively equate to a HUGE economic force and if they are now all going to swith to the PetroYuan, then the US may not survive as an economic power!

"Hence, "trouble" with the two biggest players in that BRICS group: China and Russia.

"We could see the actual start of World War 3 before the month ends. Expulsion of ambassadors is always the last step before the bullets start to fly. Diplomats getting expelled or leaving is one of the first signs of war.This means all enemy assets are being removed so they cant do anything from within."

'PetroYuan' Futures Launch With A Bang, Volume Dominates Brent As Big Traders Step In

25 March, 2018

As we detailed previously, China’s yuan-denominated crude oil futures launchedovernight in Shanghai with 62,500 contracts traded in aggregate, meaning over 62 million barrels of oil changed hands for a notional volume around 27 billion yuan (over $4 billion).

As OilPrice.com's Tsvetana Paraskova notesGlencore, Trafigura, and Freepoint Commodities were among the first to buy the new contract, Reuters reports.

On the other hand, China is not leaving everything to market forces.

One energy consultant told Reuters that:
The government (in Beijing) seems determined to support it, and I hear a number of firms are being asked or pressured to trade on it, which could help.”

PetroChina and Sinopec are seen as instrumental in providing long-term liquidity for the new market as well.
Additionally, Bloomberg reports that contract grades in Shanghai crude oil futures exchange could account for around 200 billion yuan in trades, based on China’s current import volumes, helping the nation in its efforts to internationalize its currency, Wood Mackenzie’s research director Sushant Gupta says in an emailed note.
Woodmac expects China’s crude import requirements to grow by ~2.1m b/d from 2017 to 2023, noting that incremental oil-requirement growth in China is much larger than any other country - meaning China would want to play a more active role in influencing the price of crude oil.
Trades on Shanghai International Energy Exchange, also known as INE, will enable China’s crude-buying patterns to become more transparent to the world in the longer term, and will reflect China's crude supply-demand dynamic, becoming a reference for China’s crude market (which is likely to have a bigger influence on global prices).
Woodmac expects INE prices to influence Basrah Light, Oman prices as a start as the grades account for a significant portion of contract volumes. China imports ~600k b/d of Oman crude which is large enough to start influencing Oman prices, which are retroactively set by the Oman Ministry of Oil and Gas.

Interestingly, as the PetroYuan started trading, so offshore yuan began to rally and has extended those gains today...

As we most recently noted, after numerous "false starts" over the last decade,  the “petroyuan” is now real and China will set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.

This could be a death blow for an already weakening U.S. dollar, and the rise of the yuan as the dominant world currency.

But this isn’t just some slow, news day “fad” that will fizzle in a few days.

A Warning for Investors Since 2015

Back in 2015, the first of a number of strikes against the petrodollar was dealt by China. Gazprom Neft, the third-largest oil producer in Russia, decided to move away from the dollar and towards the yuan and other Asian currencies.
Iran followed suit the same year, using the yuan with a host of other foreign currencies in trade, including Iranian oil.

During the same year China also developed its Silk Road, while the yuan was beginning to establish more dominance in the European markets.

But the U.S. petrodollar still had a fighting chance in 2015 because China’s oil imports were all over the place. Back then, Nick Cunningham of OilPrice.com wrote
Despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day.

That problem has since gone away, signaling China’s rise to oil dominance…

The Slippery Slope to the Petroyuan Begins Here

The petrodollar is backed by Treasuries, so it can help fuel U.S. deficit spending. Take that away, and the U.S. is in trouble.
It looks like that time has come…
A death blow that began in 2015 hit again in 2017 when China became the world’s largest consumer of imported crude

Now that China is the world’s leading consumer of oil, Beijing can exert some real leverage over Saudi Arabia to pay for crude in yuan. It’s suspected that this is what’s motivating Chinese officials to make a full-fledged effort to renegotiate their trade deal.

So fast-forward to now, and the final blow to the petrodollar could happen starting today. We hinted at this possibility back in September 2017
With major oil exporters finally having a viable way to circumvent the petrodollar system, the U.S. economy could soon encounter severely troubled waters.
First of all, the dollar’s value depends massively on its use as an oil trade vehicle. When that goes away, we will likely see a strong and steady decline in the dollar’s value.

Once the oil markets are upended, the yuan has an opportunity to become the dominant world currency overall. This will further weaken the dollar.

The Petrodollar’s Downfall Could be a Lift for Gold

Amongst all the trouble ahead for the dollar, there are some good news too. The U.S. might have ditched the gold standard in the 1970’s, but with gold making a return to world headlines… we could see a resurgence.
For the first time since our nation abandoned the gold standard decades ago, physical gold is being reintroduced to the global monetary system in a major way. That alone is incredibly good news for gold owners.

A reintroduction of gold to the global economy could result in a notable rise in gold prices. It’s safe to assume exporters are more likely to choose a gold-backed financial instrument over one created out of thin air any day of the week.

Soon after, we could see more and more nations jump on the bandwagon, resulting in a substantial rise in gold prices.

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