Digital Yuan Used for 1st Time in Settling Cross-border Oil Deal

The Shanghai Petroleum and Natural Gas Exchange (SHPGX) announced that the digital yuan has been used to settle an oil transaction for the first time.

On October 19, PetroChina International purchased 1 million barrels of crude oil in response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the Chinese central bank digital currency (CBDC), also known as the e-CNY, to international trade.

According to the state-controlled China Daily, the exchange stated that this is “another major step forward” for the digital yuan. The seller and the price in the transaction have not been revealed.

The deal involving crude oil is a significant step towards using the yuan in the international market and the global movement towards de-dollarization. According to China Daily, the use of yuan in cross-border settlements increased by 35% year-on-year in the first three quarters of 2023, reaching $1.39 trillion.

In March, the French TotalEnergies became the first company to use yuan to purchase liquified natural gas (LNG) on SHPGX when it agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC). The second LNG deal occurred between CNOOC and French Engie last week and did not involve the digital yuan.

On the same day, First Abu Dhabi Bank announced that it had signed an agreement on digital currency with the Bank of China, a state-owned commercial bank, at the third Belt and Road Forum for International Corporation, which had ended a day before.

The United Arab Emirates, of which Abu Dhabi is part, and China are participants in the mBridge platform, which supports cross-border transactions with CBDC. The MBridge platform is set to launch as a minimum viable product next year. In August, Abu Dhabi signed an agreement with India to settle oil deals in rupees.