Crude oil up on demand prospects: steep rise in margins on MCX

After wide volatility during the past two weeks, Clearing Corporation raised margins on the crude oil contract, with greater focus on the demand side. This has raised the price of the commodity, whixh also saw support from the international market, where prices also rose.

At 6PM on MCX, crude oil futures were trading at Rs 1,155 per barrel, up 15 per cent from yesterday’s close. On Nymex, WTI Crude oil, the benchmark for MCX, was trading 24.5 per cent higher at $15.4 after reports that some European nations, Australia and New Zealand were lifting the lockdown, indicating increased demand for oil.

The margin for crude oil has been fixed now at 100 per cent, with Rs 95,000 per lot as the absolute minimum. This means that if crude oil prices fall below Rs 950, the margin of 100 per cent will continue to be based on the price of Rs 950.

ALSO READ: Covid-19 fallout: Hotel industry revenue likely to slip by Rs 90,000 cr

The circular further said that an additional margin of Rs 1 lakh will be imposed on the near-month contract, and on the sale side of option contracts for near-month crude. The far-month contracts will attract an additional margins of Rs 50,000 per lot. Besides, if the crude price falls further, the margin money will increase accordingly. Spread benefits on initial margins have also been withdrawn.

All these measures came in after the April contract had to be settled in the negative, prompting some brokers to move court, while others raised margins without waiting for the exchange to do so.