Shanghai crude futures roar into action as global…

Nearly 40.7 million barrels of oil changed hands via the September contract during Monday's five-hour session, according to data from the Shanghai Futures Exchange. If the USA were to pull out of the deal, it would likely result in renewed economic sanctions on the Islamic Republic that could frustrate its oil exports and reduce the global supply.

"Whether this will have any real bearing on the other crude benchmarks, I'm not quite sure, but traders love a new toy, so I applaud China for bringing in something that could stoke up some volatility", said Matt Stanley, a fuel broker with Freight Investor Services (FIS) in Dubai.

The number of active USA oil rigs rose to a three-year high of 804 last week, implying further rises in future production.

Yang Xiaoping, president of BP China, said China's crude oil futures offer companies in the real economy a hedging tool that can better reflect market conditions in Asia. And demand for yuan from foreign investors eager to participate in the Shanghai International Energy Exchange will boost the currency's value and divert trading away from the dollar.

Last week, the API reported a surprise draw of 2.739 million barrels of United States crude oil inventories for the week ending March 16, defying analyst expectations of a build of the same amount.

Oil prices rose on Tuesday, pushed up by the concern that tension in the Middle East could lead to supply disruptions.

"We prefer to watch for a while", said one Weifang-based independent refiner.

Despite this, Brown said there were concerns over regulatory interference, as seen in other Chinese financial commodity markets, including iron ore and coal.

"As things stand, it is a question of when, not if, the USA withdraws from the agreement and fires a fresh sanctions salvo towards the OPEC nation", Stephen Brennock, an analyst at PVM Oil Associates Ltd., wrote about the Iran deal.

The contract for delivery in September opened about 6 per cent higher at 440.20 yuan (US$69.70) a barrel at 9:01am.

According to Wood Mackenzie, the impact will be felt on the pricing of crude oil from Iran and Oman, the current largest suppliers to China. The biggest risk was that the USA could re-introduce sanctions on Iran.

China's first yuan-denominated oil futures contracts opened higher on Monday morning as Beijing got off to a good start in its bid to gain some control over pricing the commodity.

Specific issues for traders include Shanghai's shorter trading hours, split into three slots, with the afternoon session ending at 3:00 p.m. local time (0700 GMT), just before London ramps up.

Chinese exchanges count each side of a trade - the buy and the sell - as two lots, meaning the total oil changing hands was 20,328 lots, equal to 20.3 million barrels.