"If China's crude futures don't immediately attract enough liquidity and markets are still as volatile as now, then traders could get really burned and would quickly stop trading Chinese crude futures," said one oil trader, who would likely start dealing Chinese crude futures.

Recent market interference was also a concern, although he noted China's iron ore and coal futures markets were running smoothly despite similar price routs to oil.

For futures to work, traders need a widely traded physical market from which prices for futures contracts can be derived.

Granting independent refiners access to oil imports will put pressure on China's three State-owned oil majors, PetroChina, Sinopec and China National Offshore Oil Corp, which already face headwinds from collapsing oil prices, a stock market rout and corruption charges.

"These changes are coming much faster than we anticipated," said an official with one of the big three State-owned energy companies. "Reforming and opening up the oil market is the new fashion in Beijing."

The government has so far granted a total of seven independent refiners quotas for 715,800 bpd of imported crude, roughly 11 percent of the total crude imports, and more are likely to follow.

"The liberalization of the Chinese oil market will provide more favorable market conditions for the launch of crude oil futures," INE said.

Given the reforms and increased competition, HSBC advised its clients to be "cautious toward the share price potential of China's oil majors."

Citigroup expects crude demand from the seven independent refineries to more than double to 815,000 barrels per day by the end of 2015.

At least eight more refiners have already applied for quotas, and another 15 are expected to apply, the bank said.

The reforms would advance competition by putting pressure on China's national oil firms, said Philip Andrew-Speed, head of energy security research at National University of Singapore.

"The private sector has grown in China not so much by privatization, but by squeezing the State sectors so they become either better performing or irrelevant," he said.