April 29, 2020 / 6:08 AM / a month ago

China's INE may allow oil deliveries to storage owned by participants

SHANGHAI/SINGAPORE, April 29 (Reuters) - China’s Shanghai International Energy Exchange (INE) said on Wednesday it is considering improving its crude oil futures delivery mechanism by allowing deliveries to fulfill contracts into storage tanks and ships held by market participants.

INE was responding to a Reuters query over oil importers’ concerns that speculative buying in the past two months has pushed Shanghai crude oil futures above international benchmark Brent, disconnecting China’s only crude futures contract from global markets.

“(The exchange) will gradually improve the delivery mechanism, to consider including refiners or traders’ tanks as a storage warehouse and to break bulk from a vessel anchoring point and then transfer to storage as new methods,” INE said in an emailed statement.

Reuters reported in early April that oil traders seeking to take advantage of the wide price gap between the Shanghai contract and global oil prices by delivering crude into the INE futures contracts are unable to do so because storage designated by the exchange is full.

In April, the exchange has increased the amount of storage capacity available to fulfill futures contracts to 8.5 million cubic metres, or nearly 48 million barrels, by adding new tanks in Shandong, Hainan, Guangdong and Liaoning, the INE said in the statement. The exchange also said there are now 14 delivery points.

The amount of capacity available to fulfill INE contracts was equal to 27 million barrels as of April 3, according to previous announcements from the exchange.

The INE will double its storage fee for delivery tanks to 0.4 yuan ($0.057) per day per barrel, effective on June 15. ($1 = 7.0713 Chinese yuan renminbi) (Reporting by Emily Chow in SHANGHAI and Chen Aizhu in SINGAPORE; Editing by Christian Schmollinger)

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