Mentha oil futures traded on the Multi Commodity Exchange showcased a volatile trend during the week ended November 18.

All the active contracts started the week on a positive note extending last week’s rally. Active trade participation in the futures market from the industrial users took trading higher. With the demonetisation of high-value currency by the Centre, spot market trading was affected as most of the transactions are dealt in cash.

Demonetisation led to a sharp decline in supply of mentha oil across major spot markets of Uttar Pradesh. But on the other hand, good demand is visible from the end users to meet the winter season demand. Industrial users created buy positions with an intention of taking delivery of the produce from exchange wherein payment is done online.

As on November 17, MCX accredited warehouses have a total stock of 2,242 tonnes. November contract Open Interest stood at 3,370 lots (1213 tonnes) on the closing day of November 18, 2016.

On the supply side, total production of mentha oil during the current season is 32,000-34,000 tonnes against preliminary estimates of around 40,000 tonnes, which was estimated in June 2016. Unfavourable weather conditions during harvesting period led to the drop in production. On the demand side, the seasonal demand emerges during winter season, especially from the pharma sector. Due to supply-demand mismatch as well as currency issue, mentha oil futures are expected to remain bullish.

The writer is Head – Commodity Research, Karvy Comtrade

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