Shanghai exchange approves PetroChina overseas storage for low-sulphur fuel oil

The Shanghai International Energy Exchange (INE) said on Monday it had approved 100,000 tonnes of storage capacity belonging to PetroChina International as overseas storage facilities for its low-sulphur fuel oil (LSFO) contract.

The exchange listed PetroChina facilities in Singapore and the United Arab Emirates as overseas commodity storage for the LSFO futures, which were launched in June. The initial active storage capacity is 40,000 tonnes, it added in a statement.The move marks the first time a Chinese futures contract would be deliverable outside of China and could boost contract liquidity, as well as help influence pricing for shipping fuel.

Reuters reported last month that the INE was considering using oil storage sites in Singapore owned by PetroChina as delivery points for LSFO.

"The exchange will closely track and review market developments" and make timely adjustment to the storage capacity for LSFO futures, the INE said, adding that PetroChina International would release benchmark premiums and discounts for overseas delivery on the bourse's website.

The concept of allowing domestic and overseas delivery "will help promote the use of Chinese futures prices in international markets" and benefit the real economy, an unnamed INE official said in a Q&A distributed by the exchange.

In future, this will also be applied to the bourse's other contracts such as TSR 20 rubber and bonded copper, which was launched last month, the official added.