The Hindu Business Line : NCDEX may introduce future contracts in ATF, naphtha

AFTER launching furnace oil futures, NCDEX is exploring opportunities to introduce future contracts in the petroleum products segments. The aim is to attract the bigger players in the oil industry, who prefer to hedge their risks from both ends, crude oil and refined products.

According to sources, while trading options in bulk commodities such as motor spirit and diesel are ruled out due to existing government control over prices, the exchange is carrying out initial research on the potential of creating trading platforms in aviation turbine fuel (ATF) and naphtha.

A high value item with reasonable fluctuation in prices in recent times, ATF apparently offers a lucrative opportunity. A lack of consumers may however act as a major hindrance in the way of introducing a full-fledged forward trading platform. NCDEX is yet to carry out a feasibility study in this regard.

On the other hand, there is no shortage of either users or players in naphtha. With increasing investment in both greenfield and brownfield expansion of refineries, the supply of naphtha is increasing fast.

Naturally refiners in the country will be too eager to participate in any mechanism, which may help discover a better price.

But the very availability in plenty of naphtha is a major drawback. The usage of the heavy end product is fast being replaced by natural gas. Accordingly naphtha is witnessing a steady fall in demand and prices over the last few years, so much so that refiners, hard pressed to improve the capacity utilisation, are often more concerned with the evacuation of the same.

NCDEX is in the process of assessing the natural gas availability and pricing projections in the next few years.

Meanwhile Brent crude futures launched by the exchange recently has witnessed a steady growth in participation with an average daily turnover of Rs 150 crore with reasonable open-ended position.

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