Dollar drops share in oil exchange
(MENAFN) In a significant shift, global consumers and exporters of crude oil are increasingly opting for non-dollar-denominated trade deals, marking a challenge to the traditional dominance of the United States dollar in the oil market. JPMorgan Chase's Head of Global Commodities Strategy, Natasha Kaneva, highlighted this trend, indicating that the share of the world's oil traded in currencies other than the United States dollar has surged to nearly 20 percent.
This development comes on the heels of an announcement by two major oil exporters, Iran and Russia, finalizing an agreement to conduct their oil trade in their respective national currencies rather than the United States dollar. Additionally, these countries, facing sanctions, have successfully secured buyers in China and India, offering their commodities at discounted rates.
Kaneva emphasized that the United States dollar is facing increased competition in commodities markets, with a growing number of major players exploring alternatives. While the trend is not as evident across all commodity-selling nations, countries like Brazil, the United Aarab Emirates, and Saudi Arabia have taken initial steps to lay the groundwork for non-dollar-denominated trade.
JPMorgan's data reveals a noteworthy increase in non-dollar contracts for major commodities, with twelve such contracts executed in 2023 compared to just seven in the previous year. The data primarily focuses on physical commodity deals rather than futures trading in financial markets, highlighting a tangible shift in real-world trade dynamics.
Examples of this shift include India and the United Arab Emirates signing a local currency trading deal, with an Indian refiner making the first purchase of Emirati crude in rupees. Similarly, Brazil and China have conducted their inaugural local-currency commodity transaction for a shipment of Brazilian pulp. As more countries explore alternatives to the United States dollar, the global oil market undergoes a transformative period with potential implications for the future of international trade dynamics.
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