The Hindu : Business : No downward revision of oil prices, says Aiyar

Online edition of India's National Newspaper
Thursday, Feb 10, 2005

Business

Business

No downward revision of oil prices, says Aiyar

By Our Special Correspondent

The Union Minister for Petroleum & Natural Gas, Mani Shankar Aiyar, launching the crude oil futures on the Multi Commodity Exchange along with the Managing Director of the exchange, Jignesh Shah, in New Delhi on Wednesday. — Photo: Kamal Narang

NEW DELHI, FEB. 9. A downward revision of domestic oil prices is not on the cards as the Union Petroleum Minister, Mani Shankar Aiyar, today declared that there is no immediate proposal to "defreeze" prices. He said public sector oil companies were still making losses on sales of diesel. Petrol prices, however, were slightly higher than in the international market.

He told reporters that the Government was seeking to have a stable pricing policy when the syndrome of extreme oil volatility begun in 2004 is finally over. He expected international oil markets to calm down over the next two months with the end of winter and the U.S. is putting in place economic policies to contain its fiscal deficit.

As for the proposal of the Oil and Natural Gas Corporation to acquire a 15 to 20 per cent stake in the core asset of the controversy-ridden Russian firm Yukos, Yuganskneftegaz, he said it would be discussed when he met his Russian counterpart in Moscow on February 21. He said ONGC was still interested in taking an equity stake and had not yet given up hope as the Indian oil company and the Russian firm, Rosneft continued to hold negotiations.

Crude futures trading

He was speaking on the sidelines of the launch function of the Multi Commodity Exchange, the new futures exchange based in Mumbai, which began futures trading in crude oil today. MCX opened trading in the morning for the country's first ever energy futures with a contract for U.S. light, sweet benchmark crude West Texas Intermediate (WTI). The contract is expected to provide Indian refiners with an opportunity to hedge their substantial crude imports.

Speaking on the occasion, Mr. Aiyar noted that this step was crucial for the country's oil economy and a movement towards developing an Asian oil and oil product market. He said while energy futures markets in the U.S. and Europe traded many times their underlying oil production and consumption, the need for active energy futures instruments still existed to a large extent in the Asia-Pacific.

He maintained that the MCX crude futures would allow oil producers, refiners, trades and consumers to manage their crude oil price risk with greater precision. Futures contract have been used as financial offsets to cash market risk. The MCX started off with just the first-month April contract and would introduce May and June contracts later.

The Chairman of Indian Oil Corporation, M. S. Ramachandran, suggested the introduction of futures contract linked to Brent, Oman and Dubai crude besides the present one that was linked to the U.S. WTI. He was also in favour of product futures as the absence of these would not attract refiners.

Printer friendly page
Send this article to Friends by E-Mail

Business