HC denies interim intervention in plea over negative oil price

The Bombay High Court on Thursday

denied any interim intervention in the plea challenging the settlement of crude oil contracts at negative prices.

The plea was filed by filed by brokerage firms Motilal Oswal Financial Services Ltd and PCS Securities Ltd.

Advocate Ravichandran Hegde, counsel for the petitioners, said that Justice Ujjal Bhuyan of the high court held that there was "no urgency" in the matter and fixed it for hearing for June this year.

The petitioners had approached the high court earlier this month against the Multi Commodity Exchange (MCX) of India and markets regulator Securities and Exchange Board of India (Sebi) over negative settlement of a futures contract in oil after a fall in the price of crude oil globally.

 

The petitioners challenged an April 21 circular issued by MCX fixing the due date rate of crude oil futures contract, expiring on April 20, at a negative value of Rs 2,884 per barrel following the negative settlement price for crude oil on the New York Mercantile Exchange.

As per the plea, the brokerage firms pleaded that there did not exist a delivery-based settlement for crude contracts and the same were settled in cash on the exchange, and such contracts ought to be traded at Re 1 at the least rather than at a negative price.

Advocate Hegde said that the petitioners also argued that when the MCX fixed the price at a negative value, Sebi should have intervened considering that it was an extraordinary circumstancethe prices fell owing to the impact of COVID 19 on the economy, and the restricted trade timings in India owing to the COVID lockdown.

He said that the MCX had closed at 5 pm on April 20 at a positive rate, while the Nymex front-month crude contract settled later at night at around 11.30 pm at a negative rate.

"This meant that while the traders in India could see on their screens that the price was falling, they could not do anything," Hegde said.

On Thursday, the high court observed that there existed many concerns in the matter that required a detailed hearing, and posted it for further hearing in June.