By Chen Aizhu and Shu Zhang
SINGAPORE, July 14 (Reuters) - BP delivered 3 million
barrels of Iraqi oil to the Shanghai International Energy
Exchange (INE) this month, becoming the first major global
trader to make a physical delivery since China launched the
futures market in 2018, industry sources said on Tuesday.
There have been a flurry of deliveries since May as strong
buying by Chinese financial investors drove INE futures
to a premium over Brent futures, making it profitable
for traders to deliver into the contract.
The two markets have largely converged since late June, and
the contract for the INE front month, August, is now trading
below the Brent front month, September.
Two sources with knowledge of the matter said BP delivered 3
million barrels of Iraqi oil Basra Light into an INE storage
facility in east China's Shandong province earlier this month.
BP is set to deliver another one million barrels of Abu
Dhabi Upper Zakum crude under an August contract, said the two
sources.
INE and BP declined to comment.
Swiss commodities trader Mercuria will be the next
international trader delivering into the yuan-denominated
contract, said two separate sources with knowledge of the
matter.
Mercuria is set to send one million barrels of Upper Zakum
crude for August and another one million barrels for September,
said one of the sources.
Mercuria did not immediately reply email seeking comment.
The INE crude contract is one of a handful Chinese futures
products open for direct foreign participation, as the world's
top commodities consumer seeks greater influence over pricing.
Other futures markets open to foreign participation offer
contracts for iron ore, rubber and low sulphur fuel oil.
To cope with surging demand for physical deliveries, INE has
more than doubled its storage tank capacity to nearly 60 million
barrels since April.
China's June crude oil imports jumped by a third from a year
earlier, setting a second straight monthly record, as cheap
cargoes bought during April's oil price crash arrived at Chinese
ports.
Crude delivered into INE storage are also counted as
imports.
(Reporting by Chen Aizhu and Shu Zhang; Editing by Simon
Cameron-Moore)