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Shanghai Petroleum Exchange Settles Oil Deal Using Digital Yuan

Shanghai reveals an oil deal settled with digital yuan, marking a shift in global financial dynamics.

Tue, 24 Oct 2023, 10:21 am UTC

Shanghai's key energy trading platform, the Shanghai Petroleum and Natural Gas Exchange (SHPGX), recently unveiled that the digital yuan, or e-CNY, was employed in an oil deal settlement. This marks a novel move as PetroChina International secured 1 million barrels of crude oil on October 19, 2023.

This recent development echoes the encouragement from the Shanghai Municipal Party Committee and Municipal Government. They urged for the wider use of China's central bank digital currency (CBDC) in global trade sectors. China Daily, a state-operated media outlet, acknowledged this move as an evolutionary phase in the journey of the digital yuan.

Although the seller's identity and the exact transactional amount remain undisclosed, it's worth noting that on the same day, the oil price from a collection of 13 producers was valued at $95.70 per barrel.

Notably, this signifies a broader global shift, indicating the rising clout of the yuan in international trade. This move also points towards a decreasing dependency on the dollar globally. In fact, the recent statistics shared by China Daily highlight a 35% surge in the yuan's utilization for cross-border settlements in 2023, accumulating to a total of $1.40 trillion.

Earlier this year, the yuan had already made its debut on the SHPGX platform for liquefied natural gas (LNG) transactions. However, these were traditional yuan settlements and not the digital version. Notably, French firm TotalEnergies and China National Offshore Oil Corporation (CNOOC) orchestrated the first such LNG deal. CNOOC then collaborated with French company Engie for another LNG trade settled in yuan.

Adding another layer to the emerging digital currency narrative, the Bank of China entered into an agreement with the First Abu Dhabi Bank. This pact was inked during the third Belt and Road Forum for International Corporation, which concluded on October 18.

Both China and the UAE, with Abu Dhabi as a significant component, are exploring the mBridge platform. This system, set for a launch next year, aims to fortify cross-border transactions with CBDCs.

In a related turn of events, Abu Dhabi and India made headlines in August, as they chose the Indian rupee for settling their oil transactions.

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