August 31, 2018 / 9:55 AM / 19 days ago

Private Chinese trader delivers crude oil against Shanghai contract

BEIJING (Reuters) - Shanghai Zhida Hailan Energy Co Ltd, a private energy trader set up in May last year, is one of the companies that delivered crude oil against the Shanghai September futures contract on Friday, a company spokesman told Reuters.

The Shanghai firm’s participation in the delivery is a sign that the nascent oil contract could potentially attract more private participation.

It was the first physical settlement of the contract that China hopes to grow into a global benchmark that can take on established markets like Brent.

The Shanghai-based company delivered 100,000 barrels of Iraqi oil Basra Light into storage in Zhanjiang, the only private firm among the five companies that delivered a total of 601,000 barrels of crude oil through the exchange.

The other four companies that made deliveries are all state-run, including Chinaoil, Unipec, CNPC Fuel Oil, Zhenhua Oil.

The September-delivery crude contract on the Shanghai International Energy Exchange (INE) expired on Friday.

The INE contract is the first yuan-denominated oil contract and is aimed at building a regional benchmark to reflect China’s purchasing and pricing power in the crude market. China is the world’s biggest oil importer.

“As China is set to deregulate its energy markets further, it offers immense opportunities for the private companies to be engaged in the value chain,” said an industry executive familiar with the Shanghai company’s strategy.

Zhida Hailan, a joint venture between Shanghai Zhida Holding Group and Shanghai Hailan Energy Corp, procures and trades road-paving bitumen, said the executive, who declined to be named as he’s not authorized to speak to the press.

The firm also trades bitumen and fuel oil contracts at the Shanghai exchange, he added.

Zhida Holding Group, which controls 55 percent of the trading firm, is engaged in highway building and information technology, according to the company website.

Chen Yang, Zhida Hailan’s spokesman, confirmed the company’s delivery into the crude oil contract, adding that the company sees the Shanghai oil contract as an opportunity to break into the energy trading business.

Reporting by Chen Aizhu, Editing by Sherry Jacob-Phillips and Adrian Croft

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