Monday, July 15, 2013
Crude Oil
Market Commentary
Exchange
MCX
July
6389
6357
-32
-0.50%
43300
-15064
6311
6465
6202
Natural Gas
Exchange
Contract
Open
Close
1 Week Chg
%change
OI
OI change
MCX
July
224.6
219.6
-5
-2.23%
3117
779
221.7
227.5
213.9
NYMEX-NG
August
3.626
3.67
0.04
1.13%
130401
-33168
3.67
3.76
3.55
NYMEX-WTI
August
103.95
106.25
2.3
2.21%
163859
-74085
105.28
108.42
103.10
Nymex crude oil rallied for the 3
rd
straight week on
back of supply concerns due to Egyptian debacle and
middle-east turmoil. The oil preserved its gains from
previous session which registered biggest weekly gain
in last 3 years. The EIA had earlier identified Suez
Canal as one out of the seven choke points for crude oil
supply. US gets around 2 million barrels a day from
Africa via Suez Canal. The WTI and Brent rose by 2.2%
and 1% respectively, the strength in WTI was
instrumental in narrowing WTI-Brent spread that
traded close to $2.8 for the first time since October
2010. On MCX the July contract declined by 0.5% as
home currency appreciated against dollar. The OI
contracted by a significant portion indicating profit
taking.
The Natural gas rose for the second consecutive week
after recovering from 18 weeks low. The concerns over
milder weather had pulled up gas to its three week high
but it soon pared its gains after inventory data release.
The Nymex Natural Gas rose by 1.2%, however,
stronger home currency pulled down MCX Natural gas
by 2.2%
ICE-
Brent
August
108
109.04
1.04
0.96%
101332
-93828
108.32
109.86
107.51
USD/INR
NSE
July
61.205
60.0775
-1.1275
-1.84%
3222191
-596989
60.35
61.26
59.16
Contract
Open
Close
1 Week Chg
%change
OI
OI change
Pivot
Resistance
Support
Context
Oil took off on a weak footing on account of
downside surprise in Japanese economic data, the
Trade
balance
and
Economic
sentiment
unexpectedly declined and led to crude oil paring its
gains from 14 month high
Euro zone economic data also help build pressure
on crude oil price as Germany, the largest economy
in EU indicated slowing of growth as trade balance
narrowed and industrial production declined
Pivot
Resistance
Support
Front Month Calendar Spread
Exchange
1st month
2nd month
MCX
-23
-41
NYMEX
-0.2
-1.18
WTI-Brent spread
1st month
2nd month
2.79
2.44
Context
Please refer to disclaimer at the end of the report.

Crude was expected to trade side way as it had registered the biggest weekly gains in last 3 years in
last week due to tensions in middle east and Egyptian fiasco that led to supply crunch
UK continued with its upside surprise and boosted crude oil as Housing prices delivered biggest gains
Housing
since January 2010, the RICS house price index rose to 21 against expectation of 4
While Manufacturing production and trade balance remained unsupportive of higher prices, the oil
prices sustained divergence and rallied to score a new yearly high
Crude oil managed to sustain it gains despite slow down in Chinese economy, while the short term
interest rate markets stabilized, the trade balance shrunk raising concerns about optimist estimate
for GDP growth
EIA announcement shocked the markets when it reported massive drawdown in crude oil inventory,
the storage declined by 9.8 million barrel against the estimate decline of 2.9 million barrels, the data
bolstered support for crude and helped propel it to a new 15 month high
Gasoline surged on account of unplanned unit outages at refineries, the concerns were further
asoline
aggravated, when stock piles declined by.2.6 million barrels and demand expanded by 1.8 million
barrels in same period
The FOMC minutes and Bernanke’s speech cooled of crude oil a little after dovish monetary
cooled
statement from FED, the oil declined further on back of profit booking and reversed its entire gain
from previous day
Economic data from European periphery nations continued to remain unimpressive and led to fu
further
paring of gains as Germany announced decline in pricing index and UK’s central bank members
reiterated aggressive monetary stance
US unemployment claims unexpectedly expanded to 3 month high, forcing crude oil lower to its
weekly low. However, the oil bolstered support after Federal Budget expanded by a record number
l
since May 2008
Crude oil trade higher after Chinese economic data flashed higher credit growth beating the market
expectation, and BoJ’s monetary statement that highlighted the need for reinitiating ultra loose
reinitiating
monetary policy
Egyptian debacle continued as provisional Government announced possibility of fresh elections at the
beginning of 2014, the main constitution remained suspended as Army cracked down on rioters and
Muslim brotherhood’s supporters, who had threatened to block Suez canal
s
The tanker traffic continued at below normal pace as 29 tankers on average crossed over on both
sides on daily basis for previous week against the routine daily average of 40 tanker vessels
WTI-Brent crude oil spread traded at narrowest differential of $1.99 since November 2010, before
de
settling down at $2.86 on closing basis
Oil production from Non-Opec nations increased by the fastest pace in last 20 years. International
Opec
Energy Agency announced revision in consumption growth and expanded the estimate to 1.2 million
barrels from earlier forecast of 930,000 for 2014
Natural gas preserved it gains from previous week and traded near its 3 week high before paring its
gains on normal temperature, the gas remained choppy and took firm support closer to its 18 weeks
remained
low
EIA announced 14
th
straight increase in injection of natural Gas storage, the underground storage
increased by 82 bcf against the estimated increase of 80 bcf, the total gas storage stood at 2.68
trillion cubic feet
According to the latest EIA estimates, the power plants will account for 325 of total gas consumption
by end of this year
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Outlook
In last three weeks the crude oil has appreciated by 15% and prices have settled at it 14 month high,
the prices have rose to 25% from this year’s low. Thought the fundamentals remain unchanged the
prices are expected to correct as they seemed to have risen only because of geo-political concern. The
geo-
week starts with Chinese head line indicator and high impact data like US Retails Sales, UK’s Claimant
Count and Inflation, the later is expected to be supportive of higher prices. Mild impact data like Empire
State manufacturing Index and German PPI alongside Euro Zone’s trade balance are expected to build
pressure on crude oil prices
Breach of upward resistance at 6440 can add further strength to crude oil, long position can be initiated
on close above 6475 to target 6650, stops to be maintained at 6420. Crude could weaken significantly
6420.
on close below 6320, position sell can be initiated on break down at 6280 to target 6140 and stoploss at
ion
6375
Natural gas sustaining above 222 can move up further 228 and ultimately to 236 if the weather
concerns stay supportive. On the down side 212
212-214 region is expected to provide strong support.
vide
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