China, the second largest economy, and largest oil importer is expected to launch its yuan-denominated crude oil futures contract, also known as the petroyuan, on the Shanghai International Energy Exchange (INE) after the State Council approved the mechanism.
Futures contracts are legal agreements to buy or sell a particular commodity for a predetermined price at a specified future date. According to an official at the INE, the financial mechanism will be launched on March 26.
Currently, almost all international oil trade is dependent on U.S. dollars. The yuan-denominated futures contract is an attempt to shift oil trade out of petrodollars, giving China more clout on crude pricing and opening the possibility of the Chinese currency to play a more prominent role in global trade.
Last year, the Chinese government announced plans to start crude oil futures contracts. The contract will enable China to buy oil with gold or to convert yuan into gold without needing to turn it into US dollars.
Venezuela shares China interest in challenging United States control over the global financial system, mainly due to the strict U.S. economic and financial sanctions that have gravely affected the Venezuelan people and their quality of life.
Venezuela’s President Nicolas Maduro announced the creation of a cryptocurrency backed by the country’s oil, gas, gold, and diamond reserves dubbed the Petro on Dec. 3, 2017, to counter the economic blockade, giving Venezuela new ways of accessing the international market.
According to Venezuela's Ministry of Foreign Trade, so far a group of Brazilian investors has expressed interest in purchasing US $300 million worth of Petros and countries like Poland, Denmark, Honduras, Norway, and Vietnam are willing to receive the cryptocurrency as payment for exported goods to Venezuela.
In a bid to strengthen the new digital currency, last week Maduro said he will propose an oil-backed joint cryptocurrency to the Organization of the Petroleum Exporting Countries (OPEC).