Oil futures volumes double on MCX

With crude oil trading at a record high, investor interest in the commodity in the domestic market has also increased substantially.

The average daily volume of crude oil futures on Multi Commodity Exchange (MCX) has more than doubled to 5.2 million barrels till October 31 this year, from 2.5 million barrels in FY05, a top exchange official said.

The volume in crude oil contracts on MCX witnessed all-time high of 11-million barrels with open interest of 2.14 million barrels on November 1.

"The average daily open interest for 2005 was approximately 1.3 million barrels, which has increased to over 1.6 million barrels in 2007. This is an indication of increased participation in the crude oil futures wherein all types of participants take positions to take advantage of the volatility in crude oil prices," MCX's Deputy Managing Director Joseph Massey said.

Crude oil contracts at MCX clocked a turnover of Rs 323.60 crore on November 16. Volumes were 8,94,200 barrels and open interest at 10,70,700 barrels. The December contract was up 1.65 per cent at Rs 3,633 a barrel.

In the energy segment, all MCX crude oil contracts registered a turnover of Rs 10,561.09 crore during the week ended November 16. Open interest was 1,129,500 barrels and total volume 28,893,000 barrels during the week.

Commenting on recent reports that trading of crude oil on commodity exchanges should be stopped to cool down prices, Massey said: "A futures ban would not help market pricing. In a market-driven economy, the market is required to price any asset, because it is the most transparent and neutral platform to price an asset."

"This can be applied to any market-related activity, like commodities, securities and foreign currencies," Massey said.

As crude oil approaches the $100-a-barrel mark in international markets, Petroleum Secretary M S Srinivasan had suggested halting trading of the fuel on commodity exchanges.

Trading on bourses like the New York Mercantile Exchange is contributing "enormously" to high prices, he had said.

Crude oil is one of the most important sources of energy today with over 40 per cent of the world's energy demand being met by it. Prices of crude oil are characterised by demand-supply equations, geo-political issues, weather conditions, currency factors and economic conditions in consuming nations.

"Various participants use energy contracts for their corresponding requirements in India. Producers use them to hedge against highly volatile prices while consumers use them to protect themselves against volatile prices of petroleum products. Refiners use them to protect their margins," an MCX official said.