China’s LPG futures drop on trading debut

by Jonathan Adams
China trading

China’s LPG futures contract for November delivery made its trading debut on the Dalian Commodity Exchange on Monday, falling around 9% in early trade

China’s liquefied petroleum gas (LPG) futures contract for November delivery made its trading debut on the Dalian Commodity Exchange on Monday, falling about 9% in early trade, which was in line with a drop in global oil prices.

LPG futures were last down 7.3% at 2,410 yuan ($340.00) per tonne, with over 50,000 contracts traded.

The derivatives for LPG, a refined oil product used as a fuel in vehicles and for cooking, are the third type of oil and gas product to be listed in China after the crude oil futures on the Shanghai International Energy Exchange and fuel oil futures on the Shanghai Futures Exchange.

LPG prices fell as international crude oil prices have further declined, said Ai Bo, LPG analyst at JLC consulting.

However the contract’s transaction volume is very good… LPG is a product that is easy to market and its price fluctuations are more frequent. LPG options will definitely also be active, she said, adding that trading interest in the product should sustain.

Comparatively, trading volume for iron ore futures on the Dalian exchange last stood at over 200,000 contracts, while coking coal and coke futures traded around 14,000 and 26,000 contracts respectively.

Options trading for LPG will begin on the Dalian exchange on Tuesday, the first time the derivatives will debut nearly simultaneously on a Chinese commodities exchange.

China’s commodities exchanges have so far listed option contracts on products months, even over a year after the futures started trading.

The Dalian exchange earlier said that the listings are timely in providing a new hedging tool for LPG companies, given the widespread market impact of the coronavirus outbreak, and that international derivatives markets would list new futures and options products “at the same time or after a period of time.”

Crude oil prices dropped on Monday, extending last week’s losses as the global coronavirus pandemic worsened and the Saudi Arabia-Russia price war showed no signs of abating.

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