Written by Zack Downey, Data Scientist
Ithaca, NY – February 16, 2018 – Just this week, storage locations for the Shanghai INE crude futures contract were announced:
Source: Shanghai Futures Exchange
Besides these 8 facilities, there are 3 additional backup facilities to be used for contract delivery points. Due to the strong ties between inventories and price, as demonstrated by the tight relationship between Cushing crude inventories and WTI, information on inventory levels at these facilities can be key for determining and forecasting the INE price.
How does data fit in?
In January, we talked about the value inventory data could bring to this contract. Ursa’s weekly Chinese inventory data currently includes all primary storage facilities, less the Yangshan Depot, and also includes all 3 backup storage facilities. The total capacity of these facilities are ~125 million barrels, with ~37 million barrels (5.95 million cm^3) being listed above as “Approved Storage Capacity”.
The figure below demonstrates the relationship between Ursa measured inventories at these facilities and Dubai crude price (in Yuan). We use Dubai price as a proxy for the INE futures contract.
Source: Ursa Space Systems, Inc, Bloomberg
As to be expected, there is a strong inverse relationship between inventories, especially at these defined delivery locations, and Dubai crude price in Yuan. It is still to be determined precisely which tanks in these facilities are to be used for delivery of the INE, but monitoring these facilities now and going forward will be essential for accurate forecasting of INE price.
How do I get involved?