The National Stock Exchange (NSE) on Wednesday said it was working to equip its systems to handle crises such as that caused by the crash in crude prices. The bourse added that even though the chances of Brent crude trading in the negative are few, the exchange is preparing its systems to handle crisis situations.
Indian crude prices are linked to Brent crude. The crude oil market has been facing severe volatility ever since the prices started crashing towards the end of February. This was because of the slump in demand over the Covid-19 lockdown and the price war between Russia and Saudi Arabia.
NSE chief business development officer Ravi Varanasi said: “Even though it is theoretically possible for Brent crude to trade in the negative territory, it may never happen but we are preparing our systems to handle crises.”
The UK-based Independent Commodity Intelligence Services (ICIS) also said going ahead for the calendar year, the dynamics in the oil market would depend on how the global recession played out and its impact on oil demand as well as the second wave of Covid-19 which China expects in October. The firm, however, believes that by the time there would be a second wave, the countries would be better equipped to handle their inventory.
ICIS UK also said India witnessed a 45% decrease in refinery throughput since April, followed by Europe which saw a 41% decrease as well as the US and Canada which saw a 25% decrease in its refinery throughput.
On April 22, WTI crude oil prices traded in the negative territory going up to negative $37 per barrel. According to ICIS, this was caused by panic selling by traders who had taken long positions on crude oil but did not want to take deliveries. Dearth of inventory storage also contributed to the panic selling. The overnight crash in crude oil prices caused a mayhem in the oil market which led to the multi-commodity exchange settling the April month contracts in the negative.