Yuan-backed oil futures can shatter the US dollar dominance on the crude market, according to experts polled by RT. However, the greenback will not give up the top spot easily.
“The question number one is whether China will be able to make the oil market its demand market, and not the oil supply market traded in dollars, which it is now,” Vladimir Rozhankovsky, Global FX Investment analyst, told RT. China has recently overtaken the US as the world’s number one oil buyer.
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“The question number two is trade wars. If the world trade enters into a death spiral of reciprocal economic sanctions, keeping oil trade in dollars will be a matter of strategic importance, or a matter of survival for the US,” the analyst added.
As a result, Washington can deliberately undermine the image of the petro-yuan by attacking Chinese stock, which could result in the devaluation of the yuan, making Chinese oil futures less attractive, Rozhankovsky said.
However, the US has obvious disadvantages which the petro-yuan can capitalize on. First, the US dollar is still too strong, making domestic oil production very expensive. Second, the United States does not have transatlantic pipelines, and tankers are costly and highly risky, the analyst added.
“The trade war between the US and China has already begun. China has plans to promote the renminbi as a reserve currency and there is no better move than to purchase raw materials in its national currency. It can save money on the currency conversion and become less dependent on the US dollar,” Stanislav Werner, head of the analytical department of Dominion, told RT.
The analyst notes that the oil market is worth $ 14 trillion at the moment, and is bigger than the Chinese economy. “The first trading sessions were volatile, but this is a typical story for new financial instruments. The US has a serious reason to get nervous, because in many ways the hegemony of the US dollar came from oil trading in dollars,” he said.
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