Bank of Russia expects nonresidents to appear in Russian oil futures market
Russian exchange infrastructure is ready to service all types of traders in Russian Urals crude. Trades in deliverable futures were launched at the St. Petersburg International Mercantile Exchange (SPIMEX) on 29 November 2016, as part of efforts to establish a new officially recognised price benchmark for Russia’s Urals export blend.
The Bank of Russia’s control and supervision over the trading infrastructure will ensure security, reliability, and contract execution on time and in full. The use of futures contracts backed up by physical crude delivery will alleviate the burden put on traders. These contracts will become a common instrument for a wide range of oil market players both in the real and financial sectors.
Foreign companies will have a chance to directly participate in trades for the first time owing to the legislative amendments introduced by the regulator. This innovation will attract additional liquidity to the exchange and will increase its turnovers. Another novelty of the project is the appearance of the central counterparty – as organisation guaranteeing settlement finality. The important feature of the futures market is the mechanism it offers to market-makers to support representative prices. The role of these market-makers may be played by oil companies and oil traders.
“Direct Urals crude quotations are essential for the Russian oil industry to occupy a proper place in the global energy pricing system”, says Sergey Shvetsov, First Deputy Governor of the Bank of Russia. “It is important that the price for oil exported by Russian companies will be set in the Russian Federation and that the Urals crude blend will get a well-deserved status that it possesses de facto in the international oil trade. International practice indicates that these contracts will be actively used not only by oil-producing companies but also by oil-consuming companies. The latter will be able to hedge their inherent business risks. We pin our hopes for the project being a success and for the SPIMEX becoming the centre of pricing for Russian oil deliveries via western and eastern export routes”.