China has aimed to launch domestic crude oil futures market since early last year. Chinese government originally announced to start trading the crude oil futures by the end of 2012, then the launch was postponed to early 2013. The official plan has been changed again to the end of 2013. Further postpones might be seen.
Recently, news reported two private companies in Zhejian province in eastern China have been granted license to store each 7 million barrels of crude oil. It was the first case private companies were granted crude oil storage licenses.
China has about 200 million barrels of strategic petroleum reserves at national storage facilities and major state-owned companies. The amount could cover about 20 days of the nation's petroleum consumption. Meanwhile, Chinese private companies don't have crude oil storage at moment.
On the other hand, Chinese government is scheduled to allow private companies to import crude oil in 2014. Crude oil imports in the country has been permitted only to some major state-owned companies. China's total crude oil import in 2012 was 271 million tonnes or 5.42 million barrels per day. However, private companies could be allowed to import only 10 million tonnes in 2014.
If China launches crude oil futures without enough commercial stocks and free import, the market seems to become gambling place that does not have relationship with physical market. Futures market project under such situation seems to be a figment.
Some market participants are expecting that crude oil storage and import by private sector may satisfy requirement of healthy futures market. But they are still missing overwhelmingly compared to the total crude oil distribution in China. In the United States, commercial crude oil stocks are about 360 million barrels compared to the strategic reserve of 7 million barrels.
In the fast economic growing country, systems may be reformed more rapidly than expected after started changing. However, it is not sure that liberalization in the Chinese crude oil market will accelerate or not.