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Soaring crude futures prices on the Shanghai International Energy Exchange (INE) have opened the arbitrage for traders to deliver in November what could be this year’s highest volumes of crude from the Middle East to the Chinese exchange, trade sources have told Reuters.
The prices of the November futures contract on the INE have soared in recent weeks, moving above the international benchmark Brent Crude whose futures are traded on the Intercontinental Exchange (ICE).
The higher prices of the Chinese futures have opened the arbitrage window for traders to deliver Middle Eastern crude into INE to receive higher prices, a trading source told Reuters.
At one point in October, the premium of INE crude futures over Brent futures jumped to as high as $3 per barrel, the sources added.
As a result of this arbitrage opportunity, global traders of crude are set to deliver as much as 5 million barrels of Middle Eastern crude to the Shanghai exchange in November, which is an unusually large volume for a delivery in one month, according to the trading sources who spoke to Reuters.
That’s also likely to be the highest volume of Middle Eastern crude into INE for 2024, following muted trade for most of the year.
Several traders and refiners have cargoes for delivery of these 5 million barrels of Middle East crude to the Chinese exchange. Vitol Group, the world’s largest independent oil trader, is set to deliver about 3 million barrels of these, including some 840,000 barrels of Abu Dhabi’s Murban crude and 2 million barrels of Iraq’s Basra Medium crude, the trade sources told Reuters. Two Chinese firms, private refiner Shenghong Petrochemical and state company Zhenhua Oil, deliver 1 million barrels of crude each.
Shenghong Petrochemical has already sold around 1 million barrels of Qatar Marine crude, and Zhenhua Oil is expected to deliver 1 million barrels of Basra Medium crude, Reuters’s sources said.
