While the dollar has served as a powerhouse within the oil market, the Yuan is positioned to succeed it. According to Al Jazeera, China’s appetite and need for crude are increasing annually. With 9 million barrels needed daily, being capable of paying in Yuan instead of the dollar.
The balance of power in the oil market is rapidly turning east with this and recent collaborations. Previous co-operation between Russia and Saudi Arabia alongside China’s push for yuan-denominated futures. These changes will change the geopolitical landscape within the Middle East and Chinese economic pre-eminence.
Is Petro-Yuan rising above the Dollar?
In using its currency for futures, China is directly challenging the established markets. The likes of WTI and Brent Crude are dollar based indexes that have held the market for decades. But China still has a distance to cover before taking on the petrodollar, according to Al-Jazeera.
The Yuan needs to obtain benchmarking and successfully be stress-tested before challenging the established dollar. Asian Analyst, Michel Meidan (Energy Aspects) states:
“For now, it doesn’t mean many changes. Oil is still going to trade in the US dollar, but increasingly over time. There will be more transactions, but this is not a gamechanger, yet.”