Crude oil futures markets
Crude oil is a commodity that can be traded in India on various commodities exchanges. Just like futures and derivatives markets exist for purely financial products such as equities, crude oil derivatives and futures also exist in India and around the world. Rates are available for futures and spot for crude oil. Investors can hedge their risks and do punting on the exchanges and by observing the crude oil live charts.
The commodity exchanges where crude oil is traded are National Commodity and Derivative Exchange Limited (NCDEX), Multi Commodity Exchange of India Limited (MCX) and National Multi Commodity Exchange of India Limited. These exchanges are regulated by the Forwards Market Commission (FMC). There are various categories of crude oil and these are known as West Texas Intermediate or light crude oil, Brent crude oil which is the benchmark for Europe and Oil that comes from the Middle East that contains high amounts of sculpture.
Demand in India for crude oil
India has crude oil inventories but falls short since it has a huge demand for crude oil. The daily consumption demand in India is 2.2 million barrels a day. Only about 30% of this demand is met domestically. The rest 70% of the demand is sourced through imports from various other oil producing countries in the world. The major oil reserves in the country which are about 5.4 billion barrels are located in Mumbai High, Upper Assam, Cambay, Krishna – Godavari and the Cauvery basins. The factors that affect the demand and the pricing of the crude oil in India are dependent on the supply and demand by OPEC, the fluctuating rate of dollar, external factors such as weather conditions, international terrorism, geo political conditions that can cause a disruption in the exploration and distribution of oil, refinery fires and operating conditions, further explorations and discovery of oil in various parts of the world.
NYMEX
One of the largest exchanges that deal with crude oil derivatives and futures contracts is the New York Mercantile Exchange (NYMEX). Crude Oil NYMEX shows the rate of crude oil and its various categories shows the pricing of the product in real time and predicts the demand and the supply of the oil. Crude Oil NYMEX also enables hedges, manufacturers and retailers to give and take physical deliveries and offers them many types of swaps and spreads. Many types of grades and categories that are prevalent in the US and internationally are also traded on the exchange. NYMEX also offers contracts for the grades of crude oil directly between the sellers and the buyers.
India’s strategic crude oil reserves
India is building strategic crude oil inventories reserve that will help the country in needs of emergency situations such as disruption in production and procurement, wars and other economic and geographical factors. 3 sites that is located at Mangalore, Vishakhapatnam and Podur which will cumulatively hold 5 million tonnes that can suffice 15 days of demand in the country.
