TOKYO -- The Tokyo Commodity Exchange will offer combination orders across multiple petroleum products, known in the oil industry as crack-spread trading, as a means of bolstering the languishing oil market.
Tocom will let investors trade 42 combinations of oil products and contract months starting March 24. This will help oil companies buying crude and selling gasoline, for example, to limit the negative impact on profits when the price of gas falls relative to crude.
To date, investors have had to trade futures contracts separately for crude oil and gas, meaning that securing contracts for one has not guaranteed contracts for the other. Now they will be able to order both together.
The oil industry appears to be generally welcoming the move, with a JX Nippon Oil & Energy official noting that "it's a response to market needs."
Idemitsu Kosan intends to make use of the combination orders, an official says.
Overseas hedge funds are showing strong interest as well, according to Makoto Sugitani, head of marketing at securities firm Newedge Japan.
Deposits to buy two separate contracts amount to 160,000 yen ($1,562). In a combination order, the deposit will come to just 90,000 yen or so since an investor would hold opposite positions on crude and gas to reduce price fluctuation risks for the two closely linked commodities.
Oil trading on Tocom peaked in 2003 at 40 million contracts a year but had fallen to a mere 4.4 million by last year.