← Back to Blog · 2026-09-04 · 5 min read · Product Education
Remember April 2020? Global markets were in freefall, and WTI crude oil futures did the unthinkable—trading into negative territory and wiping out countless retail traders who thought they were buying the dip. But while the West was dealing with a storage crisis and negative pricing, Shanghai crude oil futures (ticker: SC) on the Shanghai International Energy Exchange (INE) held its ground, staying comfortably in positive territory.
If you are a global retail trader who only looks at WTI or Brent, you are only seeing half the picture. Chinese commodity futures have their own structural quirks, independent liquidity pools, and unique macro drivers. Understanding how Shanghai crude operates isn't just an academic exercise; it’s a way to find new arbitrage opportunities and manage risk when Western markets are acting irrationally. Let’s break down how INE crude oil futures actually work and how you can trade them.
The Basics: What is Shanghai Crude (SC)?
Launched in 2018, the SC contract was China’s attempt to establish a regional benchmark for crude oil, priced in its own currency and reflecting Asian market dynamics. While WTI reflects US inventory and pipeline dynamics, and Brent reflects North Sea and European/Asian seaborne flows, SC is anchored to Middle Eastern medium-sour crude delivered to Chinese ports.
Contract Specifications You Need to Know
Before you risk a single dollar, you need to understand the math. Here is how the SC contract specs stack up against the Western benchmarks.
| Feature | Shanghai Crude (SC) | WTI (NYMEX) | Brent (ICE) |
|---|---|---|---|
| Exchange | INE (Shanghai) | NYMEX (CME) | ICE Futures Europe |
| Contract Multiplier | 1,000 barrels | 1,000 barrels | 1,000 barrels |
| Pricing Currency | RMB (CNY) | USD | USD |
| Tick Size | 0.1 RMB | 0.01 USD | 0.01 USD |
| Tick Value | 100 RMB | 10 USD | 10 USD |
| Underlying Grade | Medium Sour | Sweet Light | Sweet Light |
The most critical difference here is the underlying grade. WTI and Brent are sweet light crudes, which are easier and cheaper to refine into gasoline. Shanghai crude is based on medium-sour crude, which has a higher sulfur content and requires more complex refineries to process. This means SC prices reflect the economics of Asian refineries, not American or European ones. When global sulfur treatment margins shift, SC can diverge significantly from WTI and Brent.
Mechanics: Margins, Settlement, and the Night Session
Trading China futures means adapting to a different operational rhythm. The INE has structured SC to be accessible to overseas traders, but there are mechanics you must respect.
1. The USD/RMB Margin Overlay
SC is priced in RMB, but overseas traders can post margin in USD. The exchange calculates a daily exchange rate for this purpose. This introduces a subtle but critical currency overlay into your PnL. If you are long SC and the RMB depreciates against the USD, your nominal loss in USD terms is amplified. You are effectively trading crude oil and a USD/CNY forex pair simultaneously.
2. Physical Delivery vs. Cash Settlement
Unlike many retail-oriented global oil products that are cash-settled, SC is a physically delivered contract. If you hold a position into the delivery month and meet the exchange’s criteria, you are legally obligated to either deliver or receive actual barrels of crude oil at designated Chinese bonded warehouses. As a retail trader, you must ensure you roll your contract to the next active month well before the last trading day (the last trading day of the month preceding the delivery month).
3. The Asian Night Session
If you already trade rebar/iron ore, you know that Chinese exchanges run a night session to overlap with Western trading hours. For SC, the night session runs from 9:00 PM to 2:30 AM Beijing time. This is when SC is most highly correlated to WTI and Brent. The day session (9:00 AM to 3:00 PM Beijing time) is where SC often decouples, driven by local Asian physical market news and Chinese macroeconomic data.
Macro Drivers: Why Shanghai Crude Moves Differently
To trade SC profitably, you need to stop reading purely American inventory reports and start understanding Asian demand dynamics.
SC is the ultimate barometer for Asian physical oil demand. When Western paper markets panic, SC tells you what actual Asian refiners are willing to pay for real barrels.
Independent Refiners (Teapots)
China's independent refining sector, often referred to as 'teapots,' accounts for a massive chunk of the country's crude import quota system. When the Chinese government issues new import quotas, teapot demand surges, providing a structural floor for SC prices. If you see WTI dropping due to US inventory builds, but SC is holding firm, it usually means Chinese refiners are aggressively buying the dip in the physical market.
The Exchange Rate Buffer
Because SC is priced in RMB, the USD/CNY exchange rate acts as a buffer or an amplifier. If global oil prices rise and the RMB strengthens against the USD, SC might rise at a slower pace than Brent because the stronger RMB makes oil cheaper for Chinese buyers. Conversely, a depreciating RMB can push SC higher even if global benchmarks are flat, as it takes more RMB to buy the same USD-denominated physical crude.
Practical Application: Building a Strategy for INE Crude
How do we turn these structural differences into actionable trading logic? Here are two approaches global traders use when navigating Chinese commodity futures like SC.
Strategy 1: The Brent/SC Spread Arbitrage
Because SC and Brent are both waterborne crude benchmarks, they are highly correlated but structurally distinct. Professional traders constantly monitor the Brent/SC spread. When the spread widens beyond historical norms—often due to a localized supply glut in Europe or a sudden demand spike in Asia—you can short Brent and long SC, betting on a mean reversion of the spread. This removes directional crude oil risk and isolates the regional supply/demand imbalance.
Strategy 2: Trading the Session Decoupling
During the Asian day session, SC liquidity thins out and reacts heavily to local news. If a major Chinese economic stimulus is announced during the day session, SC will often rally aggressively while WTI and Brent are dormant. A practical strategy is to buy SC breakouts during the Asian day session, anticipating that the Western night session will play catch-up when NYMEX and ICE open.
Risk Management Rules for SC
- Respect the tick value: A 0.1 RMB tick is worth 100 RMB (roughly $14 USD depending on the rate). A 10-point stop loss means risking 1,000 RMB per contract. Size your positions accordingly.
- Watch the delivery calendar: Never hold a front-month SC contract into the delivery period unless you have the logistics to handle physical crude. Roll 5-7 days before the last trading day.
- Hedge your FX: If you are trading with a USD-denominated account, keep an eye on major USD/CNY moves. A 1% shift in the exchange rate can wipe out a modest crude oil gain.
Closing Thoughts
Shanghai crude oil futures are not just a regional novelty; they are a critical component of the global energy market. By understanding the contract specs, the physical delivery mechanics, and the Asian macro drivers, you can diversify your energy trading exposure and find opportunities that simply don't exist in WTI or Brent.
Reading about contract specs is one thing, but executing a strategy under live market pressure is another. If you want to test your system—whether you trade SC, or you trade rebar/iron ore—on a real-data China futures evaluation, you can do so at XS Select. We are a new platform, and we offer evaluation accounts starting from $29. Prove your edge, manage your risk, and see if your strategy holds up in the Chinese commodity markets.