MORE INDIAN COS HEDGING OIL PRICE RISK IN FUTURES MARKET

NEW DELHI, May 16, 2008 (AsiaPulse via COMTEX) -- -- At a time when the crude oil prices have shot up in the international market to US$126 a barrel, more and more Indian companies are hedging their price risk at the commodity futures trade.

The corporate interest on hedging is evident from the significant jump in crude oil volumes as well as open interest (OI) at the leading commodity exchange MCX.

The volume of crude oil business at the exchange has also surged to 8.63 million tons during the second fortnight of April this year, compared to 5.58 million tons in the same period a year ago. The average trading now is over 7 million barrels compared to 6 million barrels six months back.

Open Interest, which is the total number of outstanding contracts on a day that have not been liquidated, in the crude oil contracts have also increased substantially.

The OI on May 13 was 2.9 million barrels compared to 1.2 million barrels six months back, while on February 29 it was at 2 million barrels level.

The commodity market regulator Forward Markets Commission has also allowed exchanges to trade on six contracts in crude oil, which was earlier available on three. At present, May to October contracts are available for futures trading at the MCX.

Companies dealing in petroleum distillates like furnace oil, low sulphur high stock, base oil, naphtha and aviation turbine fuel are exposed to price risk arising out of highly volatile crude oil prices, an expert said.

"To mitigate the risk, these companies purchase crude oil futures contracts and later square-off their positions when they take delivery of the oil," he said.

(PTI)

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