CHINA laid out Friday how its first crude oil futures will be settled as the long-awaited contract edges closer to a launch.

    China, the world’s second-largest oil consumer, wants to have greater influence over global crude markets and to boost use of the yuan in commodities trading.

    The crude futures contract, to be traded on the Shanghai Futures Exchange (SHFE), will be priced and settled in the local renminbi currency, also known as the yuan, the country’s central bank said in a statement.

    Launch of the Shanghai crude futures won State approval late last year and it would be the first Chinese contract that allows direct participation by international investors, a practice the government wants to expand to existing futures such as copper.

    International participants will need to set up accounts with custodian banks to trade the contract and funds in those accounts will not be available for any other purposes besides the crude futures trade, the People’s Bank of China said.

    The new rules will come into effect at the beginning of next month, the statement said, although no date has been set for the start of trade on the Shanghai exchange.

    China has begun to loosen its grip on the State-dominated oil sector, by allowing more players to apply for crude oil import licences and quotas.

    The deregulation moves are expected to help boost liquidity in futures trading, viewed as a key for success of the contract.

    (SD-Agencies)