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By Catherine Ngai NEW YORK, March 4 (Reuters) - A novel oil futures storagecontract, which debuts as the market struggles to find places tostow oil stockpiles, may flounder because of infrastructureconstraints, traders say. On Wednesday, CME Group Inc said it was starting aphysically delivered crude oil storage futures contract at theend of March. Under the agreement, each futures contractrepresents the right to store 1,000 barrels of crude at LOOPLLC's Clovelly Hub in Louisiana. The contract is set to begin trading on March 29 for tradeday March 30, pending regulatory approval. Neo Markets Inc willhost monthly auctions of physical storage on its platform. The move coincides with both the U.S. storage hub of Cushingand the U.S. Gulf Coast market trading in a contango, a marketstructure where the near term price is cheaper than that in thefuture. Meanwhile, traders have rushed to secure storage tanksin Cushing and the Gulf, locking in deeply discounted oil todayto sell at higher rates later. "I think storage is a really useful mechanism for riskmanagement irrespective of the market in contango today. Ithappens to be more valuable today and probably in greaterdemand," said J. Robert Collins, Jr., co-chief executive officerand president at NEO Markets. With opaque storage rates in Cushing and Houston, thetransparency could be refreshing to the market, some traderssay. The CME Group says the contract will help customers managestorage price risk. The uncertainty, traders say, is that for a liquid storagecontract to make sense, it will require enough physicalinfrastructure to demand hubs including refinery row in theHouston area. HOUSTON BOUND The LOOP has a few major pipelines that bring crude into andout of the facility. Of the outbound carriers, the largest isthe 1.7 million barrel per day LOCAP pipeline, operated by theLOOP, which connects Clovelly to the St. James, Louisiana, hubsome 54 miles North. There, crude can be dispatched to refineries such as ExxonMobil Corp's Baton Rougerefinery or Motiva Enterprises' Convent refinery. Crude at St. James can also move to other pipelines such asMarathon Petroleum Corp's Capline. Some traders indicated, however, that moving differentgrades in and out of the LOOP can be difficult, with one citingthat it's a "pain due to the lack of connectivity." "Right now, there's no way to get barrels from the LOOP tothe Houston market," said Sandy Fielden, an analyst at RBNEnergy. "There's no pipeline from Louisiana to Texas, PortArthur or the Houston Ship Channel. There's a limitedfunctionality in the short term." Shell plans to start up its St. James to Texas Westward HoPipeline in 2017. LOOP imports have fallen in recent years from about 315.2million barrels in 2012 to 209.3 million barrels in 2014, datafrom Louisiana's Department of Natural Resources show. Still, the start of a crude storage benchmark could be thestandard for other crude storage benchmarks, others say. "It could be worth trying, we'll see," said a trader. (For a graphic on LOOP imports: http://reut.rs/1GTZoQI) Carriers into and out of the LOOP Inbound Carriers Pipeline Connecting Shell 24 inch Houma Nederland, Texas to Clovelly the Clovelly Hub and pipeline Deepwater Gulf of Mexico to Clovelly hub LOOP 48 inch LOOP Connects U.S. ports Main Oil Line with the Clovelly hub for waterborne movements; connects international ports to the Clovelly hub for waterborne movements BP, Shell 24 inch Mars Oil Deepwater Mars and Pipeline; Amberjack production 600,000 bpd; 161 streams with Clovelly miles hub BP Endymion Deepwater Gulf of Pipeline Co, Mexico Thunder Horse 750,000 bpd; 89 and Thunder Hawk miles production streams with the Clovelly Hub Outbound Carriers LOOP LOCAP, Connects Clovelly hub throughput with St. James, capacity of 1.7 Louisiana market million expandable to 2.4 million; 54 miles Shell 24 inch Clovelly Norco Pipeline Plains All 24 inch CAM Clovelly to Meraux American pipeline Data provided by LOOP (Additional reporting by Jessica Resnick-Ault; Editing by GrantMcCool)