China plans to launch a yuan-denominated international benchmark for crude oil futures this year aimed at the Asian market, an industry source said Thursday.

The contract will be traded at the Shanghai International Energy Exchange (INE) and will be a price reference for medium sour crude, a variety favoured by Asian players and imported mainly from the Middle East, said the source, who asked not to be named.

It has a higher sulfur content than the existing benchmarks -- West Texas Intermediate (WTI) traded in New York and Brent traded in London -- both classified as light sweet crude.

Crude oil futures are a hedge against price volatility. Prices move based on supply and demand expectations as well as geopolitical concerns.

The Chinese contract will be traded in lots of 100 barrels, said the source, who attended a seminar conducted in Singapore on Thursday by the INE for traders and brokers to drum up interest.

The WTI and Brent benchmark contracts come in lots of 1,000 barrels.

"There was no launch date given but the timetable is this year," the source told AFP.

Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the smaller size of the lots will allow retail investors to participate -- on top of big institutional players -- and boost volumes.

Ang, who closely tracks the oil market, said the new benchmark is unlikely to hurt both WTI and Brent in terms of prices but it could affect their volumes.

"A lot of Asian refineries use sour-grade crude and China is a major importer," he said, adding that the Shanghai contract would be a better hedge for players in the the region.

Ang said he expects interest in the China benchmark from Asian markets like Japan, South Korea and Southeast Asia.

"If it is liquid enough, a lot of players will be looking at trading with the INE," he said.

Chinese demand exerts great influence on prices because it is the world's second biggest oil importer and its second largest economy.

The slowdown in the Chinese economy and the sell off in the stock market have been blamed for putting downward pressure on WTI and Brent prices.

Ang said he does not expect the Chinese slowdown to affect the launch of the new contract.

"Be it good times or bad there will still be people who would like to hedge their positions," he said.

He added it was inevitable that a big oil consumer like China would launch its own benchmark as the United States did with the WTI.