Thursday, 22 November 2012

MCX Brent Crude Oil

Crude oil is a mixture of hydrocarbons that exists in a liquid form in natural underground reservoirs.

All industries are directly or indirectly dependent on derivatives from crude oil. Its price movements largely and directly affect prices of lubricants, petrochemicals, fertilizers, paints, transportation costs, etc

The prices of crude are highly volatile. High oil prices lead to inflation which in turn increases input costs,reducing non-oil demand and reduces investment in net oil importing countries.

  • OPEC output, supply and spare capacities
  • Currency fluctuations
  • US crude and products inventories data
  • Increased demand from developing countries, geopolitics
  • Weather conditions
  • Speculative buying and selling
MCX Brent Crude Oil

Contract Basis                         : Monthly(All Month Contracts Available)

No of Contracts of a year        :12

Contract Duration                    :3 Months

Price Quotation(Quoted Price)  : 1 BBL

Lot size                                    : 100

Margin Percentage                    :5% of lot value

Margin/Investment Required to
Trade Brent Crude Oil               : Approx.Rs.25,000-40,000(Subject to change as per MCX Exchange)

Tick Size                                  : Rs.1

Tick Value                                : Rs.100 Per Tick

Value for One Point/Price
Variation(Up/Down)                  : Rs.100

Trading period                         : Monday through Saturday

Trading session/Timings             : Monday to Friday: 10.00 a.m. to 11.30 p.m.
                                                    Saturday: 10.00 a.m. to 2.00 p.m.

Indian Scenario
  • India ranks among the top 10 largest oil-consuming countries. 
  • Oil accounts for about 30 per cent of India's total energy consumption. The country's total oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its total oil consumption and it makes no exports. 
  • India faces a large supply deficit, as domestic oil production is unlikely to keep pace with demand. India's rough production was only 0.8 million barrels per day.
  • The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins.
  • Balance recoverable reserve was about 733 million tones (in 2003) of which offshore was 394 million tones and on shore was 339 million tones.
  • India had a total of 2.1 million barrels per day in refining capacity.
  • Government has permitted foreign participation in oil exploration, an activity restricted earlier to state owned entities. 
  • Indian government in 2002 officially ended the Administered Pricing Mechanism (APM). Now crude price is having a high correlation with the international market price. As on date, even the prices of crude bi-products are allowed to vary +/- 10% keeping in line with international crude price, subject to certain government laid down norms/ formulae.
  • Disinvestment/restructuring of public sector units and complete deregulation of Indian retail petroleum products sector is under way.

Prevailing Duties & Levies on Crude Oil
Basic Customs Duty 10%
CessRs.1800 per metric tonne
NCCD*Rs.50 per metric tonne
Education cess2%
War fedgeRs.57 per metric tonne


Two factors that determine the market value of a specific grade of crude oil are density (measured in API gravity) and the sulfur content, respectively, giving how light and sweet the crude oil is.
  1. West Texas Intermediate
  2. Brent Crude Oil
  3. Middle East Crude Oil
West Texas Intermediate

A high–quality crude oil explored and physically traded in the US, West Texas Intermediate is one of the largest traded commodities in the world. Its crude oil API gravity is between 37 and 42 degrees and has 0.24% sulphur content. New York Mercantile Exchange (NYMEX) is the primary exchange facilitating futures trade in this light sweet crude oil.

Brent Crude Oil
A grade from the North Sea, UK, Brent is a pricing benchmark for crude from the Europe and Africa. With API 39 degree and 0.4% or less sulphur content by weight, Brent is the second most traded variety of crude in the world.

Middle East Crude Oil
  • Generally taken as the arithmetic average of Dubai and Oman crude grades, API gravity between 31 
    and 37 degrees and 2.05% or less sulphur content by weight makes Middle East Crude Oil a heavy 
    and sour crude oil
  • It is a variety with a very large physical market in the Gulf region. Most of the Indian refineries use 
    crude benchmarked against Middle East Sour Crude Oil. 
  • TOCOM is a prominent futures trading platform to trade in this grade.

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