Authorities and an existing exchange in Shanghai set up a company to operate a trading platform for the planned future contracts in the city's new free-trade zone (FTZ), state media and officials said.
The location -- separate from the financial hub's stock exchange and futures exchanges -- is a sign that foreigners may be allowed to take part in the market, which could eventually challenge Singapore's dominance in Asian energy trading.
China has pledged freer capital flows and the introduction of more financial products in the FTZ, which was established in late September.
Futures are an agreement to deliver or take delivery of a commodity or financial instrument at a set date and price.
The oil platform will become China's fifth futures exchange, the Shanghai Daily newspaper said. None of the current futures markets trade crude oil.
"We will launch it as soon as we get approval," said Yang Maijun, a top executive of the Shanghai Futures Exchange, a major investor in the new Shanghai International Energy Exchange Corp.
"We hope to establish an international crude oil futures market that will allow wide participation of foreign investors and lift China's position and influence in the international oil pricing system," he told a conference on Thursday.
A FTZ official, deputy head of the management committee Wang Xinling, told the same conference that other energy derivatives might be traded in the future.
China's State Council, or cabinet, in September pledged to further open up the domestic futures market through the FTZ.
Currently, foreign investors can deal in Chinese stock index futures through a quota system, but have not been allowed to directly trade commodities futures, although regulators have said they will be allowed to "comprehensively" participate in domestic futures trading.
China is the world's second largest oil consumer behind the United States. It produced 207 million tonnes of crude oil and imported 271 million tonnes of the resource in 2012, according to National Bureau of Statistics.
Chinese energy giant Sinopec estimates the country's oil demand could reach as much as 550 million tonnes by 2015 and more than 600 million tonnes by 2020.
