Just in case if anyone needs the solution for this, it's related to TO creation screen you selected in WM movement type configuration.
If this value is "1" source storage type will be ignored when program determines the queue when creating TO. If the value is "2" destination storage type will be ignored. In my previous configuration I had value "2" for my movement type as the movement type is related to outbound process.
I found this in standard function module Manish suggested above. Thanks again Manish for reminding me.
