Derivatives marketplace CME Group, LOOP LLC, and NEO Markets, Inc have reached an agreement to develop the first ever physically delivered crude oil storage futures contract.
The new LOOP Crude Oil Storage futures contract starts trading on Sunday 29 March 2015 for trade date Monday 30 March, pending all relevant CFTC regulatory review periods. The new contract will provide market participants with an exchange-traded contract based on crude oil storage capacity at LOOP’s Clovelly Hub (Louisiana) terminal beginning with the May 2015 contract month.
Each futures contract will represent the right to store 1,000 barrels of crude oil at the hub for a specific calendar month. The new contract is expected to enhance the liquidity of the existing NYMEX Gulf Coast Sour Crude Oil futures, which is physically deliverable at LOOP and will be renamed LOOP Gulf Coast Sour Crude Oil futures. As part of the agreement, CME Group will also broaden the specifications of this sour crude futures contract to include Poseidon, Mars and LOOP Seg 17.
LOOP comprises three single-point mooring buoys used for offloading crude tankers and a marine terminal with a two-level pumping platform and three-level control platform. Onshore storage at Clovelly is 25 miles inland, connected to the port by a 48ins diameter pipeline. Clovelly provides interim storage for crude before it is delivered via connecting pipelines to refineries on the Gulf Coast and in the Midwest.
The oil is stored in eight underground caverns leached out of a naturally occurring salt dome, which are capable of storing approximately 60 million barrels. Since 1996, one cavern has been dedicated to the Mars stream coming in from the deepwater Gulf of Mexico, which uses the same distribution system as foreign sources.
In addition, LOOP has an above-ground tank farm with fifteen 600,000 barrel tanks. Three pipelines connect the onshore storage facility to refineries in Louisiana and along the Gulf Coast. LOOP also operates the 53 mile, 48ins LOCAP pipeline that connects LOOP to Capline at St. James, Louisiana.