Shanghai's mothballed oil trading center has been approved to reopen by the Shanghai Municipal Government and the National Development Reform Commission.
The trading center, which was originally opened in 1993 and then closed in 1995, will allow traders to buy and sell forward contracts for refined oil products such as gasoline diesel oil, kerosene and fuel oil. The center, however, is still awaiting approval from the State Council, China's cabinet. Some analysts believe the State Council will obstruct the reopening of the center out of fears of handing powers currently held by the government over to the market.
China's first experiment with oil futures exchanges began with centers in Shanghai and Beijing in 1993. The centers were closed a couple of years later due to speculation and a market overhaul. The Shanghai center, if approved by the State Council, will not trade oil futures, nor will short-selling or short-buying be allowed. It will serve as a spot market in which forward contracts can be traded only when the traders hold real products.