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Pratim Ranjan Bose

Kolkata , April 6

MULTI Commodity Exchange (MCX) of India Ltd, yet to gain the confidence of the big oil companies, is expecting corporates of diverse industry backgrounds to participate in crude futures so as to hedge the risk involved in procuring commodities that have price correlation with crude oil.

Currently trading at four lakh barrels a day with an identical open interest position, MCX expects big oil companies, especially Reliance Industries, to participate in futures trading once the average daily volume touches the 10-lakh barrels mark in the next few months. The average daily turnover now ruling between Rs 70 crore and Rs 100 crore is expected to rise over Rs 200 crore.

Mr A. Sinha, CEO of MCX, told Business Line that till now L&T, Adani and Castrol have actively participated in crude futures. Of the three, "L&T participates in crude futures to hedge the risk involved in procuring furnace oil which has a price co-relation with crude oil. The company is a major buyer of furnace oil from the physical market."

To promote the cause further, MCX has launched studies to identify more such commodities having close price correlation with crude oil and attract the respective corporates in the oil futures market. "For example, we have just identified anhydrate used by the paints industry which has strong price relationship with crude."

The ultimate aim is to boost the volume trade to a level, which would attract the large oil companies. "Our current offerings are insufficient to cater to requirements of large companies who are expected to join once the volumes pick up," Mr Sinha said.

According to him, Reliance has already taken sufficient interest in the futures market. "They have our terminal and are now watching the movements closely." While Reliance officials did not confirm Mr Sinha's views, sources in the company said that depending on the volumes traded, track record and the benefits involved, the company would consider participating in the futures market in the medium or long-term. "We are now watching the MCX trade," sources said.

Interestingly, MCX does not expect PSU oil companies to join the futures market in the foreseeable future. This is irrespective of the ongoing volatility in the market. "They will take a lot of time," said Mr Sinha. His views were somewhat confirmed by sources in ONGC. The latter, alongwith Oil India Ltd, is the only supplier of crude in the domestic market. "Right now there is little availability of crude for futures trading," ONGC sources said.

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To hedge risks on co-related products — Corporates likely to take part in crude futures

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