The state-run Indian Oil Corporation on Wednesday said it plans to begin the commodity derivative transactions in a few weeks as part of its risk management strategy against the volatile international crude oil prices.
"IOC has plans to use derivative transactions in conjunction with its physical oil purchases to mitigate price risk arising from the volatile international prices," a company statement said in New Delhi.
The corporation plans to hedge the risks in crude oil prices, refinery margins and import-export prices.
IOC on Tuesday signed an agreement with oil trading firm Vitol that would help the company to begin derivative transactions soon.
The agreement was signed by P Sugavanam, director (finance), IOC and Kho Hui Meng Vitol, president, Asia Pte Ltd.
"IOC expects to start derivative transactions in a few weeks," the statement said.
With the signing of this agreement, IOC has moved closer to commencement of oil price derivative contracts through the international oil market. The International Swaps and Derivatives Association agreement sets out the broad terms and conditions under which the oil price transactions will be finalised.
Besides signing the ISDA agreement with Vitol, IOC is already at an advanced stage of negotiations with major banks and multinational companies and expects to sign the ISDA agreement with them in the next few days.
