Oil futures contracts, obligation to selling or to daily settlement?

Abstract

Oil futures contracts make it possible for all market participants to remain safe against the crude oil price fluctuations. Islamic Republic of Iran needs to import oil futures contracts to energy exchange for two reasons: First, its national income is highly dependent on crude oil price and instability in oil price leads to unstable economic situation. Second, Oil futures markets provide necessary instruments to reduce risk of oil deals, reduce volatility, increase flexibility and provide broader commercial dimensions to refiners and other buyers of petroleum and related industries. But now, exchange energy, due to jurisprudential constraints, is not able to use this powerful instrument of hedging risk, and this is incompatible with the implementation of economic resistance and resilience policies. This study analyzes financial nature of oil futures contracts and investigates the intend of the parties to the contract and shows that oil futures contracts are not, in any way, type of selling or obligation to selling because the acquisition and consequently delivery of asset are not intended by parties. Therefore, all of those jurisprudential obstacles are wrong about these contracts and are caused by the poor in recognizing the issue.

Keywords

• oil futures contracts
• futures contracts
• derivatives
• risk management