Part A: Review (2018/12/17-2018/12/21)

From December 17, 2018 to December 21, 2018:the closing price of the main contract of crude oil futures of INE on Friday was 389.6 yuan/barrel, 32.2 yuan lower than the closing price of the last trading day of last week. The highest price for this week is 430.8 yuan/barrel, and the lowest point is 385.8 yuan/barrel.

This week (2018/12/17-2018/12/21), the total volume of the main contract was 1,653,002 lots, a decrease of 589,502 lots from last week. After the close of trading this Friday, the open interest of the main contract was 52,948 lots, an increase of 26,712 lots from the last trading day of last week.

Notes: The main contract refers to the futures contract with the maximum open interest.

Part B: Market Dynamics

1. China took record amounts of west African crude, as the country's overall imports passed 10mn b/d for the first time

China took record amounts of November-loading west African crude as refiners scrambled for supplies in expectation of a sharp fall in Iranian exports.

Chinese refiners bought 1.58mn b/d of November-loading crude from the region, helping to push overall eastbound shipments to 2.52mn b/d, the highest since January and 2pc above the October figure (see graph).

Chinese crude imports breached the 10mn b/d mark for the first time over a whole month, jumping by 14pc in November to 10.43mn b/d. Refiners increased their purchases from a range of sources, including Saudi Arabia and Russia, as they sought to offset the expected loss of Iranian supply. Independent refiners in Shandong province increased their purchases as they looked to exhaust their import quotas before the end of the year. And trade tensions between China and the US prompted Sinopec trading arm Unipec to avoid US crude amid uncertainty over whether Beijing would impose tariffs on US imports, bolstering demand for sweet west African crudes as an alternative.

Chinese imports from Angola were particularly strong at 1.06mn b/d, the first time they have risen above 1mn b/d since April 2016. Chinese refiners snapped up three-quarters of the November programme in the week following the release of the loading schedule. Demand for the country's heavy sweet cargoes was particularly firm against a background of drooping heavy sour crude availabilities because of tapering shipments from Iran and Venezuela. Angolan crude values rose as a result, with heavy sweet Dalia's discount to benchmark North Sea Dated narrowing to 10¢/bl from 70¢/bl in the period when November cargoes were trading. Hungo, Cabinda and Nemba registered similar increases, spurred by the Chinese buying.

Quarter back

Chinese receipts from the region could be slower in December-January after the country was awarded a waiver from US Iran sanctions, enabling it to import 360,000 b/d of Iranian oil for six months from early November. And spot market interest from the Shandong-based independent sector has fallen steeply this month, after these refiners accounted for about a quarter of all cargoes headed to China from west Africa last month.

No Nigerian crude went to China last month, the first time in at least a year that the country has eschewed this import source. High Nigerian crude premiums may have curbed interest in the country's crude.

Indian interest in west African crude edged down to 630,000 b/d last month, although that was still higher than the average for this year. The high premiums for those light sweet Nigerian cargoes favoured by Indian refiners may have undermined demand. Indian refiners have also been stepping up purchases from the US. US exports to India have risen to nearly 185,000 b/d in the second half of this year from under 90,000 b/d in the first six months. US benchmark WTI held a wide discount of close to $10/bl to North Sea Dated when the November-loading cargoes traded, meaning that North Sea Dated- linked west African crude looked less appealing than US grades at that time.

Close to 100,000 b/d of west African crude sailed for Malaysia, including one cargo each of Angolan Cabinda and Girassol as well as one cargo of heavy sweet Doba from Chad. The Chadian crude rose by $1.60/bl between mid-September and mid-October, in line with strengthening Angolan crude differentials driven by the higher demand for heavier crudes.

West African shipments to Singapore rose to just under 150,000 b/d in November, or five cargoes, up from two shipments the previous month.

Part C: Transaction Summary

Since March 26th and up to December 21st closing, Shanghai crude oil futures’ cumulative trading volumes is 50. 56 million lots, and the cumulative trading volumes of the first month of listing (2018/3/26-2018/4/25) is 1.33 million lots. The cumulative amount of transaction is 24.56 trillion yuan (2018/3/26-2018/12/21), which is 43.3 times that of the cumulative amount of the first month of listing.

Average daily turnover of the main contract is 330,600 lots (2018/12/17- 2018/12/21), and average daily turnover of the main contract is 448,501 lots (2018/12/10-2018/12/14). Open interest of all the contracts of crude oil futures of INE also rised steadily, with 3,558 lots on March 26th and 81,150 lots after the closing of December 21st.

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