The Hindu Business Line : IOC forays into derivatives trading on MCX

New Delhi, Aug. 31 Indian Oil Corporation’s (IOC) crude oil derivatives trading on the Multi-Commodity Exchange (MCX) of India was formally inaugurated by its Director (Finance), Mr S.V. Narasimhan, on Thursday.

In a statement issued here, the company said that it is already trading on the National Commodities and Derivatives Exchange (NCDEX), another major domestic exchange, since November 2006 to hedge its price exposure. By acquiring trading-cum-clearing membership of MCX, IOC has registered its presence on both the domestic oil derivatives platforms.

Increase hedging volumes

The new initiative will enable IOC to increase its hedging volumes against indigenous purchases, besides enhancing its flexibility to use different markets, such as overseas over-the-counter (OTC) markets, as well as exchange-traded contracts.

According to Mr Narasimhan, “High volatility in international oil prices is a major challenge facing the domestic oil majors. Therefore, IOC has embraced hedging activities with a view to mitigating oil price risk, if not eliminate it.”

He opined that domestic exchanges should offer derivatives contracts on major petroleum products so that refining companies can hedge their primary risk — refining margins. He indicated that IOC would supplement its overseas OTC derivatives activity with this platform for enhancing and broad-basing its hedging activities.

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