OREANDA-NEWS. June 22, 2011. The Chinese yuan will play a more important role in the global oil market as China's consumption continues to grow rapidly, Mr Fatih Birol, chief economist at the International Energy Agency, said.

 The loss of Libyan output and seasonally high global demand are the main factors behind recent price increases, but fluctuations in currency markets and the value of the US dollar also play a significant role, one in which the yuan's influence will be rising.

 With rising incomes, China's oil demand is forecast to rise by more than 20 per cent in the next five years to 12.05 million barrels a day, the IEA said. The country's refining capacity is expected to increase by 3.3 million barrels a day during the 2011-2016 period, accounting for a third of global growth, the Paris-based watchdog noted. "(A more important role for yuan) is what the Chinese government wants also," Mr Birol said.

 Iran, whose financial transactions are restrained by US sanctions, has been selling petroleum products to China at yuan-denominated prices. Mr Birol said expensive crude oil is posing a serious threat to the global economy, as the engines of recovery - China and India - are slowing due to inflation risks.

 "(The strong growth of) China and India brings the world out of the recession" but the two countries are raising interest rates to curb inflation resulting from expensive crude, which in turn will hurt export-oriented economies that rely on them, he said.