WTI Crude Oil and Gas Futures [UPSC Notes]

The National Stock Exchange (NSE) launched WTI crude oil and natural gas futures contracts in May 2023. In this article, you can read all about the WTI crude oil and natural gas futures contracts and the reasoning behind the move by the NSE. This topic is relevant for the IAS exam economy segment.

WTI Crude Oil and Gas Futures Launched by NSE

• Rupee-denominated futures contracts on underlying NYMEX WTI crude oil and natural gas will expand the NSE’s product offering in the energy basket as well as the overall commodity segment.
• The addition of these new contracts will ensure the availability of important energy products on a single trading platform.
• The new launch will also give rise to effective trading and hedging opportunities to market participants.
• WTI is the underlying commodity of the New York Mercantile Exchange’s (NYMEX) oil futures contract. 
• In the commodity derivative space, crude oil derivatives (Brent and WTI) are one of the traded products.
• Foreign Portfolio Investors (FPIs) including individuals, family offices, and corporate FPIs are also allowed to trade in new commodity derivatives products.
• Multi Commodity Exchange (MCX) provides trade-in similar contracts on its platform. With the addition of WTI crude oil and natural gas, the National Stock Exchange aims to enhance the product portfolio and also to attract liquidity from Multi Commodity Exchange (MCX).
• In order to facilitate the investors to shift to the National Stock Exchange the specifications of the new contracts will be the same as the Multi Commodity Exchange (MCX).
• The aim of the exchange is to attract investments from Foreign Portfolio Investors (FPIs) and high-network individuals who already trade in equity derivative segments.
• Earlier the SEBI attempted to attract foreign investors in the non-agricultural commodity segment by easing norms but it was less successful.
• The success of the National Stock Exchange in attracting investments in new products will also boost liquidity in the other traded commodities.
• Previously, NSE had signed a data licensing agreement with CME Group to allow NSE to list, trade, and settle rupee-denominated NYMEX WTI Crude Oil and Natural Gas derivatives contracts on its platform.

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