Monday, December 23, 2013
Market Commentary
The energy complex was one of the strongest performers last
week as both WTI crude and Natural gas surged more than 2%.
Crude oil is trading near its highest levels in two months on
increased demand from refineries and supportive US economic
data. The impact of the Fed tapering seemed to be nonexistent
in the energy space as crude oil continues to grind higher backed
by inventory draw downs. Natural gas prices surged after a
record inventory draw and seasonal heating demand continued to
underpin prices. Some support to Brent came as Total’s refineries
remained closed owing to strikes and on concerns of a civil war
erupting in Sudan. For the week, crude gained 2.8% on the
Nymex while Natural gas rose by 2.3%.
Exchange
Contract
Open
Close
1 Week Chg
%change
OI
OI change
Pivot
Resistance
Support
Crude Oil
MCX
NYMEX-WTI
Jan
Jan
6003
96.81
6192
99.04
189
2.23
3.15%
2.30%
9548
294214
769
46582
6137
98.35
6302
100.18
6026
97.21
ICE-Brent
Jan
109.15
111.84
2.69
2.46%
310619
263681
110.51
113.22
109.13
Context
The big event last week was the FOMC where the Fed announced
tapering of its bond buying program which led to a rally in the
USD. Crude oil prices hardly reacted to the announcement as
prospects of economic growth raised hopes of improving demand.
US GDP surged 4.1% in Q3 against expectation of 3.6% driven by
growth in personal consumption, which was revised upwards to
2.0%. In other set of positive economic data, the NAHB housing
market index surged to 58 in December, the highest level since
2005. The monthly change for both Industrial Production and
Capacity Utilization were above expectations. U.S. industrial
production increased 1.1%, the largest gain since November 2012
and manufacturing output increased 0.6%, its fourth consecutive
monthly gain. In housing data, housing starts jumped 22.7%, the
biggest jump since January 1990, to a seasonally adjusted annual
rate of 1.09 million units, the highest level since February 2008
d
On the inventory front, U.S. crude supplies shrank by 2.5 million
barrels last
Context
week according to the API but there was an uptick in
gasoline and distillate inventories to counter that. Later the EIA
reported that U.S. crude inventories dropped for a third straight
week, falling by 2.94 million barrels while gasoline supplies
increased by 1.34 million barrels. In a positive push to demand,
Exchange
Contract
Open
Close
1 Week Chg
%change
OI
OI change
Pivot
Resistance
Support
Natural Gas
MCX
NYMEX-NG
Dec
Dec
272.7
4.299
276.1
4.57
3.4
0.27
1.25%
6.40%
13392
60603
-4417
-73292
271.8
4.37
283.6
4.54
264.3
4.24
USD/INR
NSE
Dec
62.35
62.215
-0.135
-0.22%
432938
-45897
62.20
62.61
61.81
Front Month Calendar Spread
Exchange
MCX
NYMEX
1st month
17
-0.08
2nd month
41
-0.27
WTI-Brent spread
1st month
2nd month
12.07
12.03
1
Please refer to the disclaimer at the end of the report.

Energy Weekly
U.S. gasoline consumption advanced 8% to 9.02 million barrels and
weekly crude imports were up 870,000 bpd to 7.68 mln bpd. U.S.
crude oil stocks at Cushing too, fell 600,000 barrels in the week
ended Dec. 13.
On the geopolitical and supply front, the oil ports in Libya that were
he
scheduled to open from Dec.15
will remain shut after the
government rejected the rebel leader’s conditions. Strike at Total’s
French refineries continues, with a majority of their production units
now closed. Workers were still on strike at Total's 155,000 bpd La
Mede, 119,000 Feyzin and 339,000 bpd Gonfreville plants,
amounting to a total capacity of 613,000 bpd. Also, concerns over
South Sudan may add to gains in oil going ahead as South Sudan
lost control of the flashpoint town of Bor triggering warnings of a
civil war. Oil workers have sought protection at a U.N. base in
South Sudan's Bentiu oil producing area. Although there is no
official confirmation of any disruption in supply, estimat are that
estimates
close to 2,00,000 barrels a day may be affected. Also, oil exports
from Iraq are down to 2.28 million bpd so far in December, down
from November's 2.38 million bpd which may provide support to
prices.
In data from China, its November crude oil output inched up 0.36%
from a year ago to 17.27 million tonnes, while natural gas
production rose by 6.44% to 10.01 billion cubic meters. Also, oil
exports from OPEC will rise by 50,000 bpd to 23.98 mbpd in the
four weeks to Jan. 4. Nigerian oil exports ar expected to fall to
are
around 373,000 bpd in February from 398,000 bpd in January,
according to shipping lists.
On the natural gas front, prices climbed to their highest level in
more than two years as cold weather and a sharp inventory drop
supported prices. Inventories fell by 285 bcf last week, the biggest
s.
decline since 1994. Pipeline flows show that output dropped by
almost 3 billion cubic feet a day in early December and total gas
supplies were 13.1% below last year levels which also added to the
bullish momentum. Going ahead, we could see a small correction in
h
prices given that Commodity Weather Group LLC has predicted
warmer-than-normal temperatures along the East Coast next week
normal
week.
Outlook
With economic data mostly supportive of crude oil prices and no
major economic trigger next week, we believe the momentum of
crude oil will stay positive. Improved demand from refineries owing
to better margins and seasonal drawdown in inventory will underpin
prices on the upside. On the Nymex, prices have managed to close
above $99 and we could see them extending towards $102
$102-103
level in the short term.
US Crude Oil Stocks
42000000
40000000
38000000
36000000
34000000
32000000
30000000
Source: Reuters
US Crude Oil Stocks (in…
US Crude Oil Production
8500
8000
7500
7000
6500
6000
5500
5000
Source: Reuters
US Crude Oil Production (in KBD)
2
Please refer to the disclaimer at the end of the report.
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Energy Weekly
Crude oil
Crude oil has supports in the 6130 region and we believe dips
could be used as buying opportunities. On the upside, one can
buy on a break above 6250 levels, targeting 6360
6360-6380 and stop
loss below 6185.
Natural gas
Natural gas has resistance around 281-283 and sustaining above
283
it will confirm positive move and could target 285/290 levels
levels.
For any details contact:
Commodities Advisory Desk - +91 22 3958 3600
commoditiesresearch@motilaloswal.com
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3
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