Setting the location of Azure blob URL has no problem. For example:

CREATE EXTERNAL DATA SOURCE YourDataSource WITH
(
     TYPE = BLOB_STORAGE,
     LOCATION = 'https://yourazurestorage.blob.core.windows.net',
     CREDENTIAL = [YourSasCredential]
)

CREATE EXTERNAL DATA SOURCE FormatFilesDataSource WITH
(
     TYPE = BLOB_STORAGE,
     LOCATION = 'https://yourazurestorage.blob.core.windows.net',
     CREDENTIAL = [FormatFilesCredential]
)

But if we set LOCATION of local Azure emulator, I keep on getting

Bad or inaccessible location specified in external data source

For example:

CREATE EXTERNAL DATA SOURCE YourDataSource WITH
(
    TYPE = BLOB_STORAGE,
    LOCATION = 'http://127.0.0.1:10000/devstoreaccount1',
    CREDENTIAL = [YourSasCredential]
)

CREATE EXTERNAL DATA SOURCE FormatFilesDataSource WITH
(
      TYPE = BLOB_STORAGE,
      LOCATION = 'http://127.0.0.1:10000/devstoreaccount1',
      CREDENTIAL = [FormatFilesCredential]
)

Query in order to test this is

SELECT *
FROM OPENROWSET(
    BULK 'folder/file.csv',
    DATA_SOURCE = 'YourDataSource',
    FIRSTROW=2,
    FORMATFILE='format-files/format.fmt',
    FORMATFILE_DATA_SOURCE='FormatFilesDataSource'
) AS DataFile