China’s Shanghai International Energy Exchange (INE) said in a statement on Thursday it increased the storage capacity at two of energy giant Sinopec’s crude oil futures delivery warehouses.
The delivery warehouses, one at the Yangpu Economic Development Zone storage in the southern province of Hainan and the other at Rizhao city in the eastern province of Shandong, would see additional storage capacity of 200,000 cubic metres each, according to the INE, which is owned by the Shanghai Futures Exchange.
This would bring the exchange’s total warehouse capacity for crude oil futures to 4.7 million cubic metres.
Reuters reported last week that oil traders seeking to take advantage of a price anomaly by delivering crude into Shanghai crude futures contracts are unable to do so as storage designated by the exchange is full.
Shanghai crude oil futures have pulled ahead of ICE Brent, making it attractive for traders to deliver Middle East crude into China.
Some companies are holding onto their warehouse receipts as INE’s storage costs are relatively low, making profits by delivering oil into the facilities, sources said, with one adding that most of the space had been booked and held by investors who treat warehouse receipts as a financial tool.
The INE last week gave its approval for Dalian PetroChina International Storage and Transportation Co, Ltd to increase its delivery warehouse storage capacity by 750,000 cubic metres to 1.15 million cubic metres in Dalian city, in the northern province of Liaoning.
China launched its internationalised yuan-denominated crude oil futures contract in March 2018 with the aim of establishing an Asian oil price benchmark.
(Reporting by Emily Chow; Editing by Robert Birsel)