The deal illustrates a rising level of acceptance of the INE futures as a pricing benchmark for crude oil trades which may lead to others outside of China to use the INE prices for deals in the future.

Unipec sold 350,000 barrels of medium-sour crude oil produced in the Middle East to independent refiner Chambroad Petrochemicals located in eastern Shandong province at a differential to the Shanghai crude futures, they said.

The 350,000 barrels were sold to Chambroad for November delivery and will be priced against INE futures for December delivery, one of the sources said.

The INE crude futures are 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 largest crude oil importer.

Unipec, the trading arm of Asia's largest refiner Sinopec, is among a handful of companies that made the first deliveries of crude through the sale of futures on the exchange in September.

In March, Unipec signed a supply deal with Shell to buy crude priced off INE futures.

"For sellers it's easy to convert dated Brent or Dubai to INE, but buyers will have to bear the price volatility," when they hedge the oil, said a Singapore-based trader.

(Reporting by Florence Tan in SINGAPORE and Meng Meng in BEIJING; editing by Richard Pullin)

By Florence Tan and Meng Meng