China is entering the world of energy trading vigorously, but economists are wondering: will it benefit the markets as some experts suggest -- or will it mean disaster for oil prices?
Persistent over-supply on the global oil and gas market has created a difficult situation for smaller oil and gas players that need to find ways to compete against state-run oil titans like Saudi Aramco and Exxon in a debt-laden, low-priced world.
But these small firms - private companies hounded with an uncertain future while sitting on top of a virtual wealth of oil and gas in prolific US shale games - may have just been handed their way out of trouble by China, the world's largest oil importer.
China, in its quest to strengthen its energy stability, is launching a new exchange of energy that will make it much easier for buyers and sellers to find each other and do business together in a robust Chinese market that might otherwise seem difficult to enter.
For smaller energy companies in the U.S. - which account for approximately 60 to 70 percent of all the country's energy entities - the Greater Bay Area International Energy Transaction Center might be exactly what the experts suggest: quicker access to a tough but enormous market.
To China, the exchange is built at a time when its voracious appetite to crude oil exceeds its domestic production to protect its energy security. Yet jitters about the modern flow of resources are widespread, and global - from the U.S. to the Middle East.
It's a booming business - and some of these smaller firms will surely seize the opportunity to engage with Chinese companies to sell their oil and gas goods.
Nonetheless, there is trepidation that easier access to the vast Chinese energy market will further jeopardize existing prices - a demand scenario that China is anticipating.
Meanwhile, the U.S. crude benchmark West Texas Intermediate settled at $61,68 per barrel at 57 cents, or nearly 1 percent. WTI reached $61.83 earlier, its highest since mid-September.
Brent, the global oil standard, ended at $67.92, or 1 percent. It reached a three-and-a-half month high of $67.94 earlier.
Crude oil prices jumped as traders responded late on Tuesday to an American Petroleum Institute report that showed a drawdown of 7.9 million barrels in the U.S., crude stockpiles for the week ended Dec. 20, against analysts' estimate of 1.8 million decrease in output.
