Futures Daily News ( Alice Zhao ）

China's Shanghai International Energy Exchange (INE) added two more storages, in Zhanjiang of Guangdong and Tangshan of Hebei, as tanks for crude futures delivery on April 24.

Both the tanks are owned by Sinopec Petroleum Reserve. The Zhanjiang tank has a ceiling storage capacity of 600,000 cubic meters and a working storage capacity of 400,000 cubic meters. The other one, located in Caofeidian, Tangshan of Hebei, owns a ceiling storage capacity of 1,000,000 cubic meters and a working capacity of 400,000 cubic meters.

The working storage capacity is the part of the storage that is allowed to be used for crude futures delivery, and it cannot exceed the ceiling storage capacity or the nameplate capacity. 

The new storage addition follows approvals for Sinochem-Hongrun Oil Storage and Transportation (Weifang)’s 2-million-cubic-meter tank as delivery point for crude futures on April 17.

The INE also gave greenlights to another two storages as the delivery tanks for crude futures earlier in April, and they are Dalian North Petroleum Products Logistics’ 100,000-cubic-meter tank and Dalian PetroChina International Warehousing & Transportation’s 800,000-cubic-meter tank.

Additionally, the exchange also allowed four existing crude-futures-purposed storage tanks to expand capacity. PetroChina Fuel Oil was permitted to expand its Zhanjiang-based storage from 400,000 cubic meters to 500,000 cubic meters on April 21. On April 9, Sinopec Petroleum Reserve was allowed to lift the storage capacity at its Rizhao and Hainan tanks by 200,000 cubic meters each. Dalian Petrochina International Warehousing & Transportation boosted its working storage capacity at its Dalian bonded storage tank to the limit of 1.15 million cubic meters.

In less than a month, the INE have made six announcements on storage expansions or new additions for crude futures delivery. In all, 4.95 million cubic meters of storage capacity has been added for crude futures delivery so far in April, bringing the total to 8.5 million cubic meters.

There are currently 14 delivery points for crude futures, compared with only six at the start of crude futures trade in March 2018. 

The INE’s rapid expansion of delivery tanks for crude futures reflects rising demand for crude delivery in an age of low oil prices.

International and domestic crude futures have dropped significantly since the start of the year, amid a combination of a price war and the COVID-19 pandemic.

NYMEX front-month WTI crude futures contract plunged to minus $37.63/bbl on April 20, the first time in history, as buyers of the contract would rather sell at a loss than lease storage at a much more expensive cost. Accelerating oil glut in the US made little storage space available.

ICE front-month Brent crude contract had tumbled to $19.99/bbl as of April 27, down 71% from the $68.9/bbl registered on January 6.

INE front-month SC crude futures closed at CNY219.9/bbl on April 27, diving 57% from the CNY506.6/bbl on January 6.