The Hindu Business Line : Crude futures witness limited corporate response

IN view of the de facto administered pricing system in petrol and diesel, both Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX) crude futures markets are seeing a limited response from the corporate sector.

The restricted market conditions have adversely affected the MCX's initiative to offer a bouquet of crude varieties for futures trading.

While the WTI crude contract is still ruling an average daily turnover of Rs 100 crore within an open interest position of 90,000 barrels, the Brent contract launched five months back has failed to leave any mark.

As a result, the exchange is now considering discontinuing the Brent contracts.

"The prevailing situation clearly points to the fact that Indian conditions are still not suitable for futures on multiple varieties of crude oil," an MCX source said, adding that there was hardly any liquidity in the Brent futures.

One result of this has been that the exchange's plan to offer a bouquet of varieties like Dubai and Oman has been put in cold storage.

"Clearly enough, day traders rules the roost in Indian conditions as corporates are in no hurry to hedge their risks as prices of petroleum-products are not keeping in tune with the global trends," an NCDEX official said.

NCDEX has hardly been able to attract corporate participation in its Brent futures, recording an average daily turnover of over Rs 40 crore and open interest position of 60,000 barrels.

The turnover in both the exchanges increased only recently as day traders came in hordes to make a killing given the prevailing upswing in oil prices.

"Indian industry is on a growth path and so is its demand for energy. The energy sector itself is also fast increasing. But that hardly serves the purpose of varing an wide array of futures trading platforms on energy products," said the NCDEX official.

The exchange has postponed its plan to roll out futures on petroleum products like naphtha and ATF.

"Right now our sole aim is to attract fresh investments in crude futures. It may happen only if corporate sector finds interest in hedging risks," the official said.

The exchange, therefore, is currently busy convincing industry about the advantages of having risk management desks.

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