Questions related to energy commodities

  1. There is no designated delivery center for crude and natural gas. What is the provision to handle physical settlement in these commodities?
  2. What is the logic behind contract launch and expiry especially for crude oil and natural gas?

Delivery centre for MCX crude oil contract is Mumbai JNPT Port and for MCX Natural gas contract it is the Hazira Hub. Both these contracts are option (intention matching) delivery logic contracts, wherein delivery will get affected only if buyer and seller give intention to the Exchange. If the delivery does not happen then only it gets settled at the due date rate. Due date rate shall be the settlement price, in Indian rupees, of the Chicago Mercantile Exchange Inc. (CME Group) NYMEX crude oil (CL) front month contract on the last trading day of the MCX Crude Oil contract. The last available RBI USDINR reference rate will be used.

The crude oil and natural gas are monthly contracts that are linked to the Chicago Mercantile Exchange Inc (CME Group) - NYMEX division’s crude oil and natural gas front month contract respectively. Both these contracts expire one day prior to the expiry day of the CME NYMEX division’s crude oil (CL) and natural gas (NG) contracts respectively on the back of liquidity concerns on expiry day of crude oil (CL) and natural gas (NG) contracts on the (CME Group) - NYMEX division.

Is it Nymex WTI or Brent? Zerodha Varsity says “Brent crude is priced higher compared to WTI. Most importantly, you need to know that crude oil traded on MCX follows the Brent crude and not WTI. In fact, Brent crude is the benchmark for International crude oil pricing.”

What does MCX Crude Oil follow?