NCDEX, IPE to co-operate for Brent crude futures

National Commodity and Derivatives Exchange Ltd (NCDEX), India's largest commodity exchange and the International Petroleum Exchange (IPE), Europe's leading energy futures and options exchange, have entered into a co-operative venture to allow Indian participants to trade rupee-denominated Brent crude futures contracts, priced and settled with reference to the benchmark IPE Brent crude futures contract.

Under the terms of the agreement, NCDEX will launch a rupee-denominated Brent crude futures contract to be traded on NCDEX in India and settled on its monthly expiry with reference to the IPE Brent Index.

As part of the agreement, the IPE will make available its real-time prices on all NCDEX trading screens in India (currently over 6,500).

Speaking on the occasion, Dr Richard Ward, chief executive, the IPE, said, "The IPE's Brent crude futures contract is a global benchmark for pricing of the world's oil. We are delighted to enter into this co-operative venture with NCDEX, which, we believe, will reinforce the significance of the Brent crude futures contract.

P H Ravikumar, managing director and chief executive, NCDEX, said, "The tie-up with the IPE represents a significant step in integrating the Indian energy markets with the international markets. The contract offers an extremely useful hedging tool for Indian participants with energy-related price risks."

Commenting on the development, Narendra Gupta, chief business officer, NCDEX, said, "The NCDEX IPE Brent crude futures contract is a major milestone in the evolution of commodity markets in the country as crude oil is one of the most important commodities that affect people all over the world. Having such a contract in India, which mirrors global developments, is just what is needed given the uncertainties in global oil economics."

The NCDEX Brent crude contract gains significance primarily because Brent is generally accepted to be the benchmark for crude the world over. It is used to price two-thirds of the world's internationally traded crude oil supplies.

Brent crude oil prices are especially relevant to India as the pricing of most of the varieties of crude oil consumed by the Indian refineries, including the domestically produced Bombay High crude oil, are benchmarked to Brent prices.

A rupee-denominated Brent crude oil contract will enable the domestic oil companies to effectively hedge an important proportion of their crude oil price risks.

Due to the high correlation of energy prices to Brent crude, Indian corporate and other energy users can also use the Brent contract to hedge their price risks.