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Crude Oil Trading in India

10 Mins 03 Apr 2023 0 COMMENT

Crude oil is the mother of the global financial market in general and the commodity market in particular, as this product contributes significantly to global economic development. A sharp increase in global crude oil prices causes higher inflation, prompting nations to look for alternative energy sources such as biofuels. Crude oil prices are influenced by factors such as supply and demand, geopolitical tension, weekly oil inventories, international trade trends, adverse weather conditions in the Gulf of Mexico, and so on. Among the various grades, West Texas Intermediate (WTI) and Brent are two important crude oil grades that are widely used around the world. NYMEX is the benchmark exchange for WTI oil while Inter Continental Exchange is the benchmark exchange for Brent oil. 

In India, crude oil and natural gas are available for trading in a smaller contract size when compared to their global benchmarks. Both of these contracts are cash settled contracts and no delivery takes place because of logistical challenges. In the following paragraphs, you will be gaining more understanding about trading aspect in Indian exchange.

Table 1: Contract Specifications


Crude Oil Futures

Crude Oil Mini Futures

Trading/Delivery Unit

100 Barrels

10 Barrels

Price Quotation



Cash settlement

Expiry Date

Around mid of Calendar Month

Tick Size

Rs. 1.00

Profit/Loss per Rs. 1 movement

Rs. 100

Rs. 10

Initial Margin (approx.)


Extreme Loss Margin



Source: Multi Commodity Exchange of India

Understanding Crude Oil Trading in India

In MCX, WTI grade of crude oil is available for trading with NYMEX WTI oil as its benchmark. The price movement of MCX crude oil is exactly same as that of their global benchmark with price quotation in Indian Rupee. Since inception of the nationalized commodity exchanges in India in 2003, crude oil futures were part of the commodity list and the options on crude oil futures were introduced in May 2018.

Over the period, crude oil options are gaining popularity amongst the investors and in the fiscal 2022-23, crude oil options are superseding the futures contracts. Following chart depicts month on month growth in the crude oil futures and options. Since beginning of April 2022, crude oil options volumes are much higher than futures volume and in March 2023, options turnover was 10 times more than futures turnover.


Table 2: Options contract specification


Crude Oil


MCX Crude Oil Futures

Expiry Day

(Last Trading Day)

2 business days prior to expiry of underlying futures contract

Underlying Quotation / Base Value

Rs. / 100 Barrel


25 ITM - 1 NTM – 25 OTM

Strike Price Intervals

Rs. 50

Tick Size

(Minimum Price Movement)

Rs. 0.10

Daily Price Limit

The upper & lower price band shall be determined based on statistical method using Black76 option pricing model and relaxed considering the movement in the underlying futures contract.


On expiry of options contract, all in-the-money open positions shall devolve into underlying futures position as follows: -

  • long call position shall devolve into long position in the underlying futures contract
  • long put position shall devolve into short position in the underlying futures contract
  • short call position shall devolve into short position in the underlying futures contract
  • short put position shall devolve into long position in the underlying futures contract

All such devolved futures positions shall be opened at the strike price of the exercised options

Source; Multi Commodity Exchange of India

Options are one of the best derivative products, and their product nature gives them an advantage over futures contracts. Because options provide the right to buy or sell an instrument but not the obligation to complete the transaction upon contract expiration by simply paying a premium to the counterparty. However, contracts in futures are a little larger and attract a large margin against a premium in options. The above chart clearly shows that options outnumber futures contracts in terms of volume. The creation of various strategies in all types of market movement, such as bullish, bearish, and neutral, is an important fact to understand about options contracts.

Energy Index

The introduction of commodity-based indexes was another watershed moment in India's commodities derivative trading history. The Energy Index ENRGDEX is a blessing in disguise for commodity investors in India because it captures the individual movement of crude oil and natural gas as a whole, making it the most effective investment tool for retail traders. ENRGDEX is a sectoral index comprised of crude oil and natural gas, with 75% and 25% weightings, respectively. The biggest advantage of ENRGDEX is that it has a lower margin than crude oil and natural gas futures contracts.


Crude Oil Futures and Options: How to Trade in Crude Oil Derivatives - ICICI Direct


The energy sector is the second largest turnover generator in the Indian commodity exchange, accounting for 37% of total volume. Crude oil prices in India are determined by their global benchmark, which is priced in Indian rupees. Energy products—Futures, Options, and Indexes—are the most preferred commodities for beginners to start with before moving on to other commodities. All investment products in the energy sector, such as futures, options, and indexes, are cash settled contracts, so traders do not have to worry about their open positions becoming mandatory delivery as they do with other commodities.

ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Ms. Mamta Shetty, Contact number: 022-40701022, E-mail address: complianceofficer@icicisecurities.com. Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Margin Trading is offered as subject to the provisions of SEBI Circular CIR/MRD/DP/54/2017 dated June 13, 2017 and the terms and conditions mentioned in rights and obligations statement issued by I-Sec. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.