MCX has decided to set the April month crude oil contract price negatively. The exchange said that the price of the contract per barrel would be (minus) -₹2,884. Brokers who were left holding the buy position for April month crude oil futures will have to bear the full loss of more than ₹400 crore.
MCX contract settlement price at expiry is derived from the nearest expiry contract at NYMEX, the US exchange. The nearest expiry contract contract closed at negative $37, post mid-night time in India. Late evening on Monday as crude oil prices kept falling, the MCX had set its April month contract expiry price at ₹1 per barrel. The last price at which the MCX contract was traded was ₹965. On Monday, open positions for MCX April month contract at expiry stood at 11,500. There was speculation as to at what price would MCX finally settle its contract.
On Tuesday, after a discussion with SEBI, the MCX said that the settlement price of its April month contract will be based on last price of nearest NYMEX contract expiry and accounted in the obligation for trade date April 21, 2020 and settled on April 22, 2020.
“The Crude Oil futures contracts are traded in MCX for the last 15 years and the said contracts are always settled at Due Date Rate as specified in the contract specification i.e New York Mercantile Exchange’s (NYMEX) WTI Crude oil front month contract’s settlement price converted into Indian Rupees. The Crude Oil futures contracts expired on April 20, 2020 are also being settled on NYMEX WTI crude oil front month contract’s settlement price (i.e. - $37.63) converted into Indian Rupees (RBI USDINR reference rate: 76.6335) and rounded off to the nearest tick. The due date rate of Crude Oil futures contract expired on April 20, 2020 has been set at – ₹2884 per barrel,” MCX said.