Ncdex kick off furnace oil futures trading

The National Commodity and Derivatives Exchange (Ncdex) launched trading in furnace oil futures contract on Monday. The bourse has signed an agreement with Bharat Petroleum Corporation Limited (BPCL) for developing delivery mechanism for the contract.

If contracts are not squared off, BPCL will step in and supply furnace oil from its Mumbai and Sewri warehouses. The initial target of the company is 5,000 tonne.

The contract enables those companies which use furnace oil as an alternative energy source for their plants to hedge the rising input costs.

While inaugurating the contract by flagging off the first trade, Ashok Sinha, chairman and managing director, BPCL, said the launch is significant as its prices are being monitored internationally. Users will be able to take the maximum benefit as they have the option to square off.

"This would be a common platform for producers (such as Hindustan Petroleum Corporation Ltd. (HPCL), Indian Oil Corporation), importers (like Adani and Korloskar) and consumers to hedge their risk. We expect IOC and HPCL would also to take part in the hedging soon," Sinha said.Sinha told Business Standard that BPCL is providing only warehousing support to the bourse.

The company would be treated as a normal trader, he added.

"The launch of furnace oil futures in association with BPCL is indeed a significant step towards aligning the domestic energy markets with global bourses. BPCL will help the industry use the contract to contain costs through furnace oil futures trading. Ncdex is committed to bringing the international market linkages to domestic participants through structuring of contracts relevant locally.