Key Details
The address, From Fundamentals to Financial Resilience: India’s Oil & Gas Market, sets out SEBI’s approach to energy derivatives rather than announcing a new regulation. Its central argument is that commodity markets should support price-risk management by refiners, manufacturers, SMEs and other energy users.
Area | Regulatory signal |
|---|---|
Market purpose | Success should be measured by risk protection for physical businesses, not trading volumes alone |
Domestic gas | Indian Natural Gas Futures are linked to prices on the Indian Gas Exchange |
Crude oil | Brent-based futures provide a hedge against a benchmark used for much of India’s imported crude |
Participation | Greater involvement of physical value-chain companies, SMEs and downstream users |
Market development | Trusted benchmarks, liquidity, clearing safety and participant education |
Market scale | Oil and gas derivative turnover reached about ₹33 lakh crore during April–July 2026 |
Energy Security Also Requires Protection from Price Volatility
The speech broadens the meaning of energy security. Securing sufficient physical supplies of oil and gas remains essential, but import-dependent businesses also need protection from sudden changes in international prices.
Exchange-traded derivatives allow a company to agree on or protect against a future price. This can make fuel and feedstock costs more predictable for refiners, transport operators, manufacturers and other energy-intensive businesses.
SEBI’s position is that such contracts should function principally as risk-management instruments for the physical economy, rather than markets whose success is measured only through speculative turnover.
Domestic Gas and Imported Crude Require Different Hedges
The speech highlights two previously approved derivatives designed for different energy-price exposures:
Indian Natural Gas Futures, linked to the Indian Gas Exchange, reflect local demand, supply and trading conditions.
Brent Crude Oil Futures allow refiners, oil-marketing companies and other users to hedge against the international benchmark used to price much of India’s imported crude.
Matching a derivative with the underlying price exposure is important. If the futures price and the price paid for the physical commodity move differently, part of the financial risk remains unprotected. This is known as basis risk.
Physical-Market Participation Is the Critical Test
High trading volumes do not necessarily mean that derivatives are being used by companies exposed to energy-price risk. SEBI therefore wants greater participation from corporate treasuries, SMEs and downstream energy users.
This requires more than new contracts. Businesses need adequate liquidity, credible benchmarks, internal hedging capabilities and an understanding of margins and collateral requirements.
SEBI consequently places participant education, benchmark integrity, liquidity and clearing safety alongside product development as conditions for a deeper energy-derivatives market.
Policy Relevance
Turnover is not an adequate measure of market usefulness. Regulatory assessment should examine how much trading represents hedging by entities with genuine exposure to oil and gas prices.
Benchmark credibility determines hedging value. Transparent methodology and representative physical-market data are necessary if domestic prices are to influence commercial contracts.
SME access requires institutional capacity. Smaller firms may need standardised guidance and appropriate products to use derivatives without creating additional financial risks.
Product design must follow physical pricing practices. Contracts linked to benchmarks that businesses actually use can reduce basis risk and improve protection.
Energy and financial policy are becoming more closely connected. Effective commodity markets can help businesses absorb external price shocks, but they cannot replace supply diversification, storage or long-term energy planning.
Relevant Question for Policy Stakeholders: How can SEBI deepen participation by genuine oil and gas users while preventing increased liquidity from being driven principally by speculative trading?
Follow the Full Speech Here: Address by Shri K. V. R. Murty, WTM, SEBI at MCX Global Commodity Conclave — From Fundamentals to Financial Resilience: India’s Oil & Gas Market