Oil traders are carefully watching to see which country will follow Venezuela’s decision to export crude oil denominated in renminbi instead of US dollars.

Venezuela, the 11th largest oil producer in the world, announced on September 15 it would sell oil and gas in yuan to avoid the “tyranny of the dollar,” according to a plan announced by President Nicolas Maduro. The US promptly responded by announcing sanctions that would bar certain financial dealings with Venezuela.

Carl Weinberg, chief economist and managing director at High Frequency Economics, said Wednesday that China will “compel” Saudi Arabia to trade oil in yuan. He said if this happens, the rest of the oil market will follow suit and abandon the US dollar as the world’s reserve currency.

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China wields significant power on the world oil market. In the first half of 2017, China passed the United States as the largest importer of crude oil – 8.5 million barrels a day on average versus 8.1 million barrels a day imported by the US, according to government data from both countries.

In the first eight months of 2017, China imported 281.1 Metric Tonne Oil Equivalents, or 2 billion Barrels Oil Equivalent. At an average price of US$49.36 per barrel, China spent $99.11 billion for the eight months on oil imports, or about $148 billion per year.

The Chinese government’s plan to promote the use of renminbi in global commodity markets has been outlined in recent speeches by Chinese officials and oil producers.

China will promote the use of renminbi in the global commodity markets, Xinhua Finance Agency reported, citing Pan Hongsheng, the deputy secretary general of the People’s Bank of China’s monetary policy committee.

The country will push forward the formation of pricing systems for yuan-denominated commodity products and encourage local commercial banks to launch innovative financial services to support these developments, Pan said in a speech during the first World Petroleum Business Conference in Hangzhou in Zhejiang province on September 18.

It will also encourage the launch of derivatives and currency tools to help investors trade yuan-denominated commodity products, he said.

Pan said Shanghai International Energy Exchange will launch the country’s first yuan-denominated crude oil futures soon. He expected Belt and Road countries, which are exporting a significant amount of commodity products to China, should start using yuan-denominated crude oil futures as a benchmark for pricing.

Pan said all these measures are aimed at promoting renminbi internationalization.

Shanghai Petroleum and Natural Gas Exchange reformed its pricing system and improved its trading platform earlier this year and won support from oil and gas traders, Liu Jian, Deputy General Manager of China National Offshore Oil Corporation, said at the same event.

These reforms were aimed at helping China increase its bargaining power in the international oil prices, given that the amount of oil imported by China was increasing, Liu said.

Liu said Chinese oil and gas companies should actively participate in the country’s oil and gas futures and spot markets and help promote the use of Chinese indices and futures as benchmarks when they are trading with foreign countries, particularly those along the Belt and Road Initiative.

Chinese oil and gas companies should help protect the mutual interests of China and Belt and Road countries, he said.

The preparation work for the launch of the first yuan-denominated crude oil futures in China has come to the final stage, China Securities Times reported, citing Fang Xinghai, vice chairman of Chinese Securities Regulatory Commission, who attended the China (Zhengzhou) International Futures Forum on September 8.

Fang said in the National Financial Work Conference in July that China has put a lot of effort into increasing its influence in global commodity markets, with many traders now using China’s copper, purified terephthalic acid (PTA) and iron ore futures products as their benchmarks.

Crude oil futures is the primary starting point for China to further open up its futures market, he said.