Shanghai International Energy Exchange oil futures contracts

The Shanghai International Energy Exchange will increase the margin rate and price limit for Crude Oil and Low Sulfur Fuel Oil starting from today.

Russia’s invasion of Ukraine has sparked widespread economic retaliation on Russia. This includes Europe’s ban of Russian oil and natural gas, including the shutdown of Germany’s Nord Stream 2 pipeline. Consequently, global oil prices skyrocketed following the news of a potential US ban on Russian oil and gas imports. The Shanghai International Energy Exchange, which is a global platform for trading energy derivatives, is attempting to mitigate China’s exposure to volatility in the oil markets.

Raising margin rates of future contracts from 10% to 12% means that a buyer needs to have more money up-front to purchase the contract, limiting the amount of speculation in markets. Raising price limits from 8% to 10% accounts for radical price changes in underlying commodities, and helps maintain an orderly market. As global markets continue to fluctuate due to the ongoing war, expect China to take further measures to mitigate risk and to attempt to leverage the circumstances for economic gain. Some measures so far include a China-Russia oil and gas deal and China’s removal of restrictions on Russian wheat imports.