Iran Energy Exchange is to launch futures contracts for petroleum products in near future, the IRENEX chief said.
“The Securities and Exchange Organization approved the guidelines last week to launch the futures contracts via IRENEX,” Ali Naqavi was quoted as saying by IRNA.
Addressing the press Naqavi said the technical infrastructure is in place in coordination with Central Securities Depository of Iran, the clearing house of Iran’s capital market, and the Tehran Securities Exchange Technology Management Company.
“The trading platform is in pilot phase and we hope to launch the first oil-based futures contracts before September,” he said.
A futures contract is a standardized, legal agreement to buy or sell an asset at a predetermined price at a specified time in the future. At this specified date, the buyer must purchase the asset and the seller must sell the underlying asset at the agreed-upon price, regardless of the current market price at the expiration date of the contract.
Underlying assets for futures contracts can be commodities–such as crude oil, commodities, agricultural products, or other financial instruments.
The first phase calls for launching contracts for gasoline, methanol, naphtha and natural gas condensate. Futures backed by other petroleum products will be offered over time
In the first stage IRENEX plans to lunch futures for gasoline, methanol, naphtha and natural gas condensate. “Futures backed by other petroleum products will be offered over time,” Naqavi said.
Selling natural gas at IRENEX is another plan scheduled for the current fiscal year (ends March 2022). Gas sales via IRENEX is enshrined in the budget where offering 10 billion cubic meters is envisioned before the year is out.
In 2018 the Oil Ministry offered crude oil in this market but it fell flat reportedly due to buyers’ anxiety about new US sanctions announced that year.
Another plan calls for launching “Energy Saving Certificates” at IRENEX to optimize energy consumption across industries.
ESCs are tradable certificates that typically represent one megawatt-hour of energy saving. They are normally used to provide evidence of compliance with an obligation on electricity producers, suppliers or consumers to use energy of a specific type.
If producers do not meet the mandated target for energy consumption they should pay a penalty. The certificates are given to producers when an amount of energy is saved and producers can use it for their own target compliance or sell it to other parties unable to meet targets.
IRENEX Track Record
The newly-appointed IRENEX chief said the organization is expanding as new commodities are listed. Energy carriers are offered by 71 companies and 74 brokerages. Traders include 1,300 Iranians and 600 foreign nationals.
Deals reached 290 trillion rials ($1.16 billion) since the beginning of the current fiscal year until June, registering 40% growth compared to the corresponding period last year.
Deals mostly included hydrocarbons weighing 2.41 million tons valued at 250 trillion rials. Electricity offered was worth 2.19 trillion rials and standard salaf contracts 36 trillion rials.
Salaf bond is an Islamic contract similar to futures, with the difference being that the contract’s total price is paid in advance.
