China looks to weaken US dollar with petroyuan as oil producers rally to Beijing, and Russia has 'become an Asian nation,' analyst says

While the dollar will likely remain the dominant global currency in the near future, the rise of a so-called Petroyuan will gain traction as China uses its status as the world's biggest oil importer.

The US dollar is the top currency for trade. The dollar's lead in commodity markets has been challenged by Beijing's push to use the yuan as a currency for oil deals.

The biggest driver of the shift away from the dollar was Russia's invasion of Ukraine.

Moscow overtook Saudi Arabia as China's top oil supplier last year as a result of Western countries freezing Russia's currency reserves and shunning its oil.

Russia has become an Asian nation that has introduced the Chinese currency into large-scale oil trade.

He said that it was naive to think that China wouldn't want to conduct trade in the currency that it controls because of the price of oil.

The Federal Reserve's monetary tightening campaign caused the dollar to soar last year. A rising dollar makes oil contracts more expensive.

As trade with Russia increases, China is looking to the Middle East to replace it.

During his visit to Saudi Arabia last month, the Chinese President encouraged the countries in the Gulf Cooperation Council to use the National Gas Exchange in China for energy deals. Over $30 billion in trade deals were signed by China and Saudi Arabia.

Zoltan Pozsar, an analyst with Credit Suisse, said in a recent note that the trip marked the birth of the petroyuan and that China wants to dedollarize parts of the world.

Russia, Iran, and Venezuela make up 40% of the proven oil reserves of the organization.

Many Asian countries will have to rethink their trading routines because of the petroyuan.

China's central tenets of its commodity policy are strict oversight over even the most mundane details of crude and currency trade that could help strengthen the country's grip over energy markets.

China controls how much state-owned oil companies can export. When it senses that its companies are being treated differently, it caps the price of coal when it's needed.