IOC starts derivative trading on MCX

New Delhi, Sep 01: Indian Oil Corp (IOC) today said it has begun crude oil derivatives trading on the Multi- Commodity Exchange (MCX) of India.

The company 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," a company press release said.

Mcx accounts for over 95 percent of energy derivatives contracts traded in India. The average volume of crude oil futures traded on mcx during the first half of 2007 was about 4.5 million barrels per day, providing considerable depth for an efficient price discovery.

"The new initiative will enable ioc increase its hedging volumes against indigenous purchases, besides enhancing its flexibility to use different markets, like Overseas Over-the-Counter (OTC) markets, as well as exchange-traded contracts," it said.

IOC is the only oil psu to acquire membership of both the major domestic exchanges offering oil futures contracts.

IOC Director (Finance) S V Narasimhan said the company has embraced hedging activities with a view to mitigating oil price risk in view of highly volatile international oil price scenario.

"Domestic exchanges should offer derivatives contracts on major petroleum products so that refining companies can hedge their primary risk, viz, refining margins," he said.

He indicated that IOC would supplement its overseas OTC derivatives activity with this platform for enhancing and broad-basing its hedging activities.