After China signed the first order of RMB settlement of Middle East crude oil, US traders will also frequently keep an eye on the night session

According to the data released by the National Bureau of Statistics on March 15, from January to February this year, the production of crude oil was 33.
47 million tons, an increase of 4.
6% year-on-year, an increase of 2.
9% over December last year, with an average daily output of 567,000 tons, 113.
01 million tons of processed crude oil, down 1.
1% year-on-year, and an average daily processing of 1.
915 million tons
.

The data also shows that from January to February, China imported a total of 85.
14 million tons of crude oil, compared with 46.
14 million tons in December last year, down 4.
9% from December last year, when crude oil imports in December last year increased by 20.
1%
compared with November.
In 2021, China imported a total of 513 million tons of crude oil, down 5.
3% year-on-year, from 10.
85 million b/d in 2020 to 10.
26 million b/d
in 2021.

Oil storage in Zhuhai, China

According to the data released by the China Petroleum and Chemical Industry Federation in February, China's crude oil dependence on foreign oil fell to 72% for the first time in 20 years (the highest value in the history of the United States was 66%), down 1.
6% compared with the previous year, we note that this has been confirmed by the decline in China's imported crude oil data in recent months, achieving a double decline in China's import of crude oil and foreign dependence, while China's petrochemical industry will achieve 14.
45 trillion yuan in revenue in 2021, an increase of 30%.
Hit an all-time high
.
China is the world's second largest consumer of crude oil and the largest importer of crude oil
.

However, according to Reuters on February 27, citing an industry data and trader data, Chinese energy buyers will still increase oil purchases in 2022 to increase oil reserves, and the slight decline in crude oil import data in the last two months may be related to a significant increase in oil prices
.

Oil tankers at Zhoushan Port

China is the world's largest importer and second largest consumer of crude oil, accounting for 44% of the world's oil demand growth, in recent years, China has been rapidly building up the Strategic Petroleum Reserve (SPR), while private commercial inventories are also growing, as new refineries are put into use, working inventories
must be established.
According to the Medium- and Long-Term Plan for National Petroleum Reserves, China will form a reserve scale
equivalent to 100 days of net oil imports.

Shanghai Yangshan Port crude oil storage tank

For example, in 2020, due to the spread of the global new crown virus, coupled with the short oil price war between Saudi Arabia and Russia, oil prices plummeted to the lowest point in 20 years, Chinese oil refining companies took the opportunity to buy a large amount of crude oil, at the same time, in recent years, Chinese companies have also acquired and invested in a large number of oil and gas field projects abroad, and the outside world generally believes that most of the crude oil actually entered the SPR and provided protection
for future energy demand.

Not only that, because Chinese refiners can buy more Iranian crude oil at slightly lower prices, the National Iranian Oil Company has also been storing a large amount of crude oil in bonded warehouses in China, according to Reuters, Iran is shipping record amounts of crude oil to the Chinese market or bonded warehouses, which may continue to grow
in 2022 in the context of Iranian oil or will return to the global oil market.

Refineries in China began using their inventories in October last year and have redeployed them
in seven of the past 10 months.
So, how many days can China's strategic reserves of crude oil be used? According to Reuters analysis, China's strategic oil reserves can subtract the total amount of crude oil imported and domestic output from crude oil processing to obtain a valuation
.

According to the data released by the National Bureau of Statistics, excluding the import volume in January and February this year, the crude oil import volume in 2021 alone is as high as 10.
26 million b/d, and the domestic output is 3.
98 million b/d, so that the total amount of crude oil available to the refinery is 14.
24 million b/d, while the processing volume of Chinese refineries is 14.
07 million b/d (the total processing volume in 2021 is 703.
55 million tons), which means that the crude oil processed by the refinery is about 170,000 b/d less than the crude oil that can be obtained from imports and domestic output.
This means that the number of crude oil storage tanks flowing to China is 170,000 barrels per day, down from 1.
26 million barrels per day in 2020
.

China's main crude oil terminal Qingdao Port

It is worth noting that data released by Refinitive Oil Research on March 12 estimates that crude oil imports in major Asian markets were 26.
16 million b/d between February and March 10, up from 24.
47 million b/d in January and 23.
71 million b/d in December last year
, and in terms of barrels per day, March imports are likely to be the highest since the beginning of COVID-19 in early 2020.

According to the analysis, these phenomena show that China's oil refining enterprises actually store a large amount of oil reserves, much more than the outside world knows, according to the report published by CLSA, China has now built 9 major national reserve bases.
The amount of crude oil reserves may be between 220 million and 384 million barrels, or equivalent to 16-27 days of processing, which also means that although the Russian-Ukrainian conflict has made the importance of global energy security more and more important, Chinese oil companies will be able to ensure the supply of oil products because Chinese oil refiners have stored a large amount of crude oil
in advance.

In terms of oil currency trading, according to the latest data provided to the BWC Chinese network team in the previous period, as of the 14 months of February, the cumulative trading volume of RMB crude oil futures reached 48.
32 million lots, an increase of 2.
62% year-on-year, and the cumulative turnover exceeded 21 trillion yuan, an increase of 55.
2% year-on-year.
Participants
from 25 countries and regions including the UAE.

In terms of the global crude oil trading time zone, Shanghai is a 24-hour continuous trading range with New York and London, and at present, all Chinese traders and large oil companies have shifted from foreign exchanges to Shanghai, which reflects the increasing influence of the renminbi on the Asian crude oil market, which is considered to be the "most important kilometer"
of China's Liangjian crude oil RMB stage.

It should be known that whether a new oil monetary system has the active participation of foreign investors reflects the pricing power, and more and more international participants continue to trade is also a link connecting China's crude oil futures market and the international spot market, and it is also a concrete embodiment of the RMB pricing function, which will mean that there will be more international institutional investors entering the Shanghai crude oil futures market in the future to support China's real economy
.

For example, a senior U.
S.
crude oil futures trading investor told us earlier that RMB crude oil futures have been expanding their currency pricing power for crude oil in Asian and European markets for nearly four years since they were listed, and this is in the view of the US financial website Zerohedge, and now, there are more and more signs that for all oil export companies and trading parties
, the two major crude oil futures of US oil and cloth oil may not be as important as before.

The new news shows that at present, Chinese customers have begun to use RMB settlement when trading crude oil with some countries, and the volume performance is strong, the trading volume is at a record high, and most of the transactions are carried out in RMB, which shows that the RMB has played the role of
petroleum currency.

BWC Chinese Network International Finance Team again in the week of March 12 through email and online investigation of some U.
S.
crude oil futures trading investors results, they said that after the RMB crude oil in the Asian market pricing function appeared, this trend is more obvious, the global crude oil futures market price fluctuations and trading volume has been driven up, and the most direct performance is that American traders are finally about to start frequently staring at the night of RMB crude oil futures
.

This is the most vivid footnote, but also means that the renminbi is expanding the pricing power of crude oil in the Eurasian market, you know, before the Shanghai crude oil futures contract was not listed, the international trading volume in the past Asian session was very light, and the price fluctuation was extremely small, at the same time, China is also steadily promoting exchange rate reform and a wider range of financial market opening, but also means that there will be more international investment pouring into China's real economy
.

The new development is that China's relevant institutions have expressed support for Shanghai to be the first to try out the free use of the renminbi, and the time is ripe for China's commodity retail and futures markets to adopt the digital yuan, for example, in August last year, the digital yuan began to be used in transactions on the Dalian Commodity Exchange, and the trader can use the digital yuan to pay storage fees to the delivery warehouse, providing future exchanges and participants with an efficient, zero-cost and safe choice of oil trading currency
.

According to the latest forecast of Saxo Bank, at present, many oil-producing countries are already very willing to settle
transactions in the form of RMB.
For example, investors in markets such as Russia, Angola and Iran may use the renminbi to trade, and according to Reuters, a Chinese oil giant has signed the first yuan-denominated Middle East crude oil import agreement, which is said to be from Iran, and plans to sign more such contracts in the future, China is expected to take measures to pay for crude oil imports in yuan and expand the pilot program
.

This means that the newly born oil renminbi can also provide oil producers with an additional choice of oil currency when trading oil, thus providing convenience for investors who have the need to bypass the petrodollar, and if Saudi Arabia also decides to sell oil to the Chinese market in yuan instead of dollars, then this situation will change the global crude oil market
.

For example, oil-producing countries do not need to store large dollar reserves for the purchase of oil, let alone pay the dollar exchange rate difference to buy oil
.
At the same time, China's institutions are also making the renminbi a freely usable international currency increasingly approaching, which also means that the premium situation of imported crude oil may be improved to some extent, and it means that more investment will pour into China's economy, especially in the
current situation of global oil supply due to the Russian-Ukrainian crisis, which is compressing global oil inventories and making oil prices break through the high market situation in seven years.

In this regard, the Nikkei Asia Review also said that Asian countries are best to transition crude oil and other energy trade to the RMB and the Japanese yen, the international presence of RMB crude oil is rising, and the new oil currency is rising, and then Reuters is more blunt, saying that before, whether it is Russia or the United Arab Emirates Dubai crude oil futures products, the challenge to the petrodollar has failed, but China's RMB crude oil futures have successfully done what
others have tried in vain so far.

Of course, the petrodollar will not immediately lose its dominance, it will be a slow process, readers and friends should also soberly realize that the current main benchmark of global crude oil futures is still denominated in US dollars, and which oil currency to choose is determined by the market, not to mention a zero-sum game, but the above will be a long way to go
for the oil yuan that was born less than four years ago.