Monday, November 25, 2013
Market Commentary
U.S. crude oil gained 1.1% during the week after rallying towards
$95.6 during the mid week, mostly on profit taking after having
surged on some bright outlook for oil with an upbeat, better than
expected initial jobless claims data out of the U.S. Investors were
also focused on the Geneva talks between Iran and western
powers, over the Middle East nation's nuclear program, the
outcome of which could impact the oil supply scenario. Investors
also weighed the Energy Information Administration's weekly oil
report which showed a less than expected rise in U.S. crude
stockpiles, with hints the Federal Reserve may cut down the pace
of its monthly bond-buying program sooner than later.
Context
The previous week went into discussion over an agreement of 6
nations with Iran and finally it went through over the weekend.
Iran and six world powers sealed a deal curbing its nuclear
programme, a fillip for global economic growth. The agreement
gives Iran some relief from crippling sanctions and is considered a
big step toward a more lasting treaty. While Iran will not be
allowed to increase its oil sales for six months, any easing of
Middle East tensions tends to lead to lower crude prices. Prices
are reacting to the historic deal because it takes some of the risk
premium out.
WTI has ended flat stopping a continued declined the past six
weeks, the longest losing streak in 15 years, as U.S. crude
inventories expanded amid a surge in production. Stockpiles
climbed by 375,000 barrels to 388.5 million in the seven days to
Nov. 15, said EIA.
d
The initial jobless benefits in the U.S. last week fell by 21,000 to a
seasonally adjusted 323,000, beating expectations for a decline of
Context
9,000. The news sparked demand for oil by stoking hopes for a
more robust U.S. economy down the road.
Brent has risen 4% since Tuesday as nuclear talks with Iran have
Exchange
Contract
Open
Close
1 Week Chg
%change
OI
OI change
Pivot
Resistance
Support
Crude Oil
MCX
NYMEX-WTI
Nov
Nov
5893
94.43
5992
94.97
99
0.54
1.68%
0.57%
10194
114338
2174
-210523
5936
94.68
6119
96.14
5808
93.51
ICE-Brent
Nov
108.5
110.49
1.99
1.83%
304599
-20051
109.47
112.42
107.53
Exchange
Contract
Open
Close
1 Week Chg
%change
OI
OI change
Pivot
Resistance
Support
Natural Gas
MCX
NYMEX-NG
Nov
Nov
229.8
3.73
235.9
3.88
6.1
0.15
2.65%
3.91%
7651
24103
-285
-74900
231.8
3.70
241.5
3.86
226.1
3.62
USD/INR
NSE
Nov
63.00
62.935
-0.065
-0.10%
349694
-129618
62.71
63.46
62.19
Front Month Calendar Spread
Exchange
MCX
NYMEX
1st month
-42
-1.12
2nd month
51
0.08
WTI-Brent spread
1st month
2nd month
15.52
13.78
1
Please refer to the disclaimer at the end of the report.

Energy Weekly
dragged on without a deal that could relieve sanctions that have
kept a substantial amount of Iranian crude from world markets.
Brent's premium to the U.S. benchmark crude contract widened by
ium
$1.55 in the past week to $16.21 a barrel, the biggest spread since
March 15.
Signs of stronger demand from refiners ending seasonal
maintenance work lent support for crude in recent days. But some
recent operational snags at some Gulf Coast facilities means
t
refiners will likely be slow to erase an overhang of 45 million barrels
compared with the five-year average level for mid
year
mid-November.
That's the highest surplus to the five-year average since December,
year
when stocks were more than 50 million barrels over the five
five-year
average.
Even amid recent high refinery maintenance periods, U.S. refiners
have been processing high volumes of crude and sending large
volumes of diesel/heating oil and gasoline aboard to m
meet strong
overseas demand. The impact of recent lower refinery output, lofty
exports and hardier domestic demand is trimming inventories and
providing support for refined products. Domestic demand for
diesel/heating oil hit its highest level for this tim of year in six
time
weeks, while inventories dropped to the lowest level in nearly a
year.
Meanwhile, gasoline prices in the U.S. are in the midst of an
unusual increase for this time of year. A handful of refinery
problems in the Gulf Coast have slowed outpu while an increase in
output,
exports has reduced supplies. Meanwhile, the price of ethanol,
which is blended into gasoline, has nearly doubled over the last two
weeks.
For the third week in a row we have formed a hammer in the
natural gas markets, which of course suggests that the market
se
wants to go higher. However, there is quite a bit of significant
resistance just above, so we are a bit hesitant to start buying.
Instead, we want to see some type of resistive candle above in
order to start selling on signs of resistance, as it should continue to
show signs of resistance right around the four dollars level.
Outlook
Last week’s oil moves went back and forth during the week yet
again, proving that the market certainly sees a bit of support in the
$94 region. However, there isn’t enough to get it to go higher
er,
either. We simply seem “stuck” in this area, and as a result we feel
this market will eventually go higher, but we need to see the $96
level cleared in order to be convinced of the impending bounce.
US Crude Oil Stocks
42000000
40000000
38000000
36000000
34000000
32000000
30000000
Source: Reuters
US Crude Oil Stocks (in barrels)
2
Please refer to the disclaimer at the end of the report.
fer

Energy Weekly
The market certainly and oversold territory at this point time, and
there is a ton of support all the way down to the $90 levels, so it
is going to be difficult to sell even if we do break down a little bit.
The Fed statements on tapering will continue to impact the
market, because of which, we may continue to see quite a bit of
volatility in this market over the next several weeks. On the MCX,
volatility in the rupee is creating a bearish bias and crude can
show weakness towards 5820 and towards 5770 in the coming
days. Upside looks to be a bit capped around 5920 above which
ys.
6000 can be the next possible level.
For any details contact:
Commodities Advisory Desk - +91 22 3958 3600
commoditiesresearch@motilaloswal.com
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fer