The importance of derivatives in the oil and gas industry is prominent

Core reading

China's crude oil futures have given full play to their price discovery and risk control functions, and their importance has become increasingly prominent, and the number of domestic and foreign traders has been increasing
.
The current market size has surpassed the Dubai Mercantile Exchange's Oman crude oil futures to become the world's third largest crude oil trading futures after Brent and WTI
.
At the same time, China's crude oil futures and the industrial chain upstream and downstream production, trade, processing enterprises increasingly close, service entity function is obvious, has become one of
the effective means for domestic and foreign oil-related enterprises to deal with risks.

"In recent years, the scale of China's futures market has steadily improved, and the quality of futures market operation has been continuously improved, which has played an escorting role
for relevant entity enterprises to better alleviate price fluctuations, resist cyclical risks in the industry, and make scientific decisions and steady operations.
" At the 10th China International Petroleum Trade Conference held in Shanghai recently, Wang Fenghai, general manager of the Shanghai Futures Exchange, pointed out
.

After more than 20 years of development, the Shanghai Futures Exchange has initially established a multi-level derivatives market system
for the coordinated development of energy commodity futures, options and warehouse receipt transactions.
Especially in the field of energy derivatives, the construction of the energy futures market has been deeply cultivated, which has provided convenience
for enterprises to carry out risk management.
At present, the Shanghai Futures Exchange has successfully listed crude oil, low-sulfur fuel oil and asphalt futures and other energy varieties, and the scale of the crude oil futures market is ranked third
in the world.

The function of serving the real economy is prominent

As the first international futures variety in China, China's crude oil futures (hereinafter referred to as "INE crude oil futures") have received widespread attention
from the market since its listing.
Nowadays, INE crude oil futures have withstood various risks and tests at home and abroad, the market operation is more stable, the scale is larger, the structure is better, and the service entity function is prominent, and the overall development trend
is good.

Li Xinhua, General Manager of Mercuria Energy Trading (Beijing) Co.
, Ltd.
, said: "INE crude oil futures give full play to the functions of price discovery and risk control, and their importance is increasingly reflected, and the number of domestic and foreign traders is increasing
.
The current market size has surpassed the Dubai Mercantile Exchange's Oman crude oil futures to become the world's third largest crude oil trading futures after Brent and WTI
.
”

According to reports, from January to October 2021, INE crude oil futures have traded 33.
7 million lots, with an average daily unilateral transaction of 170,000 lots close to 170 million barrels, and an average daily unilateral position of 79,500 lots, which is several times or even dozens of times
the corresponding indicators of Oman crude oil trading.

In addition to the increase in scale, INE crude oil futures and the production, trade and processing enterprises in the upper, middle and lower reaches of the industry are increasingly closely linked, and the function of service entities is prominent
.
Especially in the context of the sharp fluctuations in international oil prices last year, INE crude oil futures have become one of the
effective means for domestic and foreign oil-related enterprises to cope with risks.

"At that time, the market trading was volatile, making it difficult for upstream oil producers, downstream refineries, including traders to cope with this huge volatility, and the setting of crude oil futures made forward delivery a powerful grasp
to solve risks.
" Li Xinhua pointed out
.

An industry insider, who did not want to be named, also said: "When oil prices were low last year, we noticed that INE crude oil futures approved a very large number of delivery libraries, which to a certain extent became an effective way for everyone to hoard oil and absorb low-cost oil reserves under the background of low oil prices, providing a very large buffer and oil storage space
for the country.
" ”

Build a diversified energy derivative system

In fact, for energy products, the Shanghai Futures Exchange listed fuel oil futures as early as 2004, petroleum asphalt futures in 2013, and low-sulfur fuel oil futures in 2020 after listing China's first crude oil futures variety to the outside world in 2018
.
On June 21 this year, the Shanghai Futures Exchange listed crude oil options
.

"The Shanghai Futures Exchange continues to increase the supply of varieties and further improve the on-site energy derivatives system
.
" Wang Fenghai pointed out, "Since the listing of crude oil options on June 21 this year, the operation has been stable, the pricing is reasonable, and the on-site and off-site linkage is close
.
As of the end of October, the cumulative trading volume was 896,100 lots, the cumulative transaction amount was 6.
077 billion yuan, and the position at the end of the period was 16,100 lots
.
Well-known oil-related enterprises at home and abroad have participated, and some domestic enterprises have begun to refer to the Shanghai crude oil option price
when pricing crude oil and downstream finished products.
”

Lv Changkai, Managing Director of Optiver China, also affirmed the crude oil options listed this year: "Since the listing of China's crude oil options, the trading volume has been stable and the market interest is strong, which provides an effective volatility reference
for the Asian trading session.
As an important supplement to the domestic crude oil market, crude oil options enrich the risk management tools of crude oil prices, which is conducive to the further effective play
of the function of the futures market.
”

The launch of another futures variety, low-sulfur fuel oil futures, has also provided convenience
for relevant market players.

"Low sulfur fuel oil futures have gradually developed into one of the important fuel oil derivatives trading markets, the world's first 'domestic delivery + overseas pickup' model for industrial customers in Asia, the Middle East to provide more convenient international delivery services, the release of the average monthly settlement price for the market to provide data services
that match the trade needs and trading habits of upstream and downstream enterprises in the industrial chain.
" Wang Fenghai said
.

Natural gas futures accelerate landing

Under the requirements of the carbon reduction target, China's energy structure will accelerate the transformation
to low carbon.
In the process of transformation, there are many challenges and opportunities
for enterprises related to the oil and gas industry.
Changes in the structure of supply and demand will make oil and gas price fluctuations more intense, operational uncertainty will increase, and the requirements for enterprise risk management capabilities will become higher and higher
.

For example, since the beginning of this year, international LNG prices have continued to rise, showing a trend
of "low season is not weak, peak season is more prosperous".
Under the continuous high and even doubling of natural gas prices, many gas companies appear to be more and more passive
.

Fortunately, at the 10th China International Petroleum Trade Conference, Wang Fenghai revealed that the listing of LNG futures is currently being accelerated
.
"In the face of the increasingly strong risk management needs of the natural gas industry, the Shanghai Futures Exchange continues to promote the research and development of natural gas futures, and in August this year, LNG futures were officially approved by the CSRC and are currently accelerating the listing work
.
"

"In the last period, the Institute will adhere to the service of the real economy as the center, adhere to the law of market development, in the process of achieving the carbon reduction target, continuously improve the quality of its own operation, promote the improvement of price discovery efficiency, further consolidate the foundation of stable operation, and continuously enrich the sequence of futures varieties, while steadily promoting the listing of options and index derivative products, serving oil, natural gas, low-sulfur fuel oil and other related oil and gas industries, and helping entity enterprises to smoothly pass the reform period
of energy transformation.
" Wang Fenghai said
.