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					   18 July 2011                                          Energy Daily


    FOR PRIVATE CIRCULATION ONLY                                                                      18 July 2011

   Crude Oil                                                         Highlights
   MCX Crude Oil (Rs/barrel)
                                                                        •   NYMEX crude inches up Tuesday after
    Contract   Open         High       Low       Close     Change
                                                                            1.3% slide yesterday
     Jul-11    4327         4337       4226      4263       -66.00      •   Demand concerns and firmer US dollar
     Aug-11    4369         4379       4265      4302       -66.00          weigh on crude oil prices
     Sep-11    4412         4422       4312      4346       -65.00      •   The US dollar index trades little changed
                                                                            after 0.3% rise yesterday
   NYMEX WTI Crude Oil (USD/barrel)                                     •   Asian equity markets trade mixed today
    Contract  Open        High         Low       Close     Change           after fall in US markets yesterday
     Aug-01   97.37      97.69         94.69     95.93      -1.31       •   US NAHB housing market index rose to
     Sep-01   97.83      98.05         95.05     96.25      -1.35           +15 in July from +13 previously
     Oct-01   98.16      98.43         95.47     96.65      -1.34       •   Goldman Sachs cut their forecasts for US
     Nov-01   98.61      98.64         95.92     97.12      -1.34           economic growth to 1.5% from 2%
                                                                        •   Fitch warns that it would lower U.S. AAA
     Dec-01    99.2      99.36         96.42     97.62      -1.37
                                                                            credit rating if debt ceiling in not raised
     Jan-01   99.38      99.38         97.08     98.11      -1.38
                                                                        •   Focus today on US housing data and API
                                                                            weekly inventory report
   ICE Brent Crude Oil (USD/barrel)                                     •   API likely to note a 1.3 mn bbl drop in US
    Contract    Open        High       Low      Close      Change           crude oil stocks
     Sep-01      117.7      117.8     114.66    116.05      -1.21
     Oct-01      117.4     117.65     114.66    115.96      -1.31    Market Analysis
     Nov-01     117.61     117.61     114.79    116.09      -1.31    NYMEX crude trades in a narrow range over $96
     Dec-01      117.7     117.91      114.8    116.19      -1.33    per barrel Tuesday after a 1.3% slide in the
     Jan-01      117.8      117.8      114.9    116.21      -1.36    previous session. Crude oil fell as low as
     Feb-01     117.77     117.77     114.89    116.17      -1.37    $94.69/bbl in intraday trade yesterday but
                                                                     recovered more than a dollar to end near
   NYMEX Heating Oil (USD cents/gallon)
    Contract   Open       High        Low       Close      Change
                                                                     Crude oil has witnessed mixed trade over past
     Aug-11   312.91     313.42      304.54     307.77      -4.03
                                                                     few days indicating lack of direction in the
     Sep-11   313.43     314.56      305.71     309.05      -3.87    market. Weighing on crude oil prices are
     Oct-11   315.59     315.61       307       310.43      -3.77    demand concerns amid weakening outlook for
                                                                     US and Euro-zone economies. Also weighing on
   NYMEX Gasoline (USD cents/gallon)                                 prices is strength in US dollar against the Euro.
    Contract  Open       High        Low        Close      Change
     Aug-11  314.25     315.19      304.85      309.74      -3.19At current price, the premium of ICE Brent
     Sep-11   309.4     309.45      300.13      304.79      -2.86crude Sept contract over NYMEX WTI crude
     Oct-11  295.24     295.24      286.68      290.68      -2.92stands at $19.77/bbl. The spread between the
                                                                 two varieties of crude has widened lately as
   market players shifted to Brent amid expectations that higher stocks in US storage will limit upside in WTI
   prices while supply concerns in North Sea will support Brent prices. The spread narrowed earlier last week
   after reports that Royal Dutch Shell lifted force majeure on its Nigerian Bonny Light crude oil loadings eased
   supply concerns. However the spread widened again as EIA noted an increase in stocks at Cushing, the
   delivery terminal for NYMEX crude futures.

   Crude oil inched up today amid anticipation that weekly inventory report may note another decline in US crude
   oil stocks. Early estimates indicate that API is likely to note a 1.3 mn bbl decline in US crude oil stocks.
   Gasoline and distillate stocks are expected to note an increase of 0.3 mn bbl and 1.3 mn bbl respectively.

   Also supporting prices are supply concerns amid refinery outage in Texas and strike concerns in Nigeria. As
   per Reuters report, Valero Energy Corp on Monday said a crude unit was down at its 214,000 barrel-per-day
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   18 July 2011                                     Energy Daily
   Texas City refinery. Meanwhile reports noted that Nigeria's senior oil workers' union PENGASSAN would join a
   three-day strike this week including shutting down oil and gas installations.
   However weighing on crude oil prices are demand concerns amid weakening outlook for major global

   The U.S. is world’s biggest crude oil consumer. Concerns about US economy are high amid recent mixed US
   economic data and Fed’s downbeat assessment. Meanwhile lack of consensus amidst US policy makers over
   raising debt ceiling has kept concerns high. In addition to it, rating agencies have warned that US rating may
   be downgraded.

   US President wants Republicans and Democratic representatives to agree on raising the nation’s $14.3tn debt
   ceiling to borrow beyond 2 August to avoid default. While emergency looms to raise the debt limit, Republicans
   are proposing $2.4tn in immediate spending cuts with no tax increases as the condition for raising the
   country's borrowing limit.

   Moody Investor Service and Standard & Poor last week warned that they would place US’ credit rating on
   review for a possible downgrade if debt ceiling talks fail. As per Reuters report, Fitch Ratings on Monday
   warned that if U.S. debt ceiling is not raised prior to Aug.2, the agency will place the nation’s rating on
   negative watch. Adding to uncertainty about US economy, Goldman Sachs has cut its forecast for U.S. Q2
   growth to 1.5% from 2% citing weaker consumer spending.

   Apart from US economy, uncertainty persists about health of Euro-zone economies. Euro-zone debt problems
   intensified lately amid a rating downgrade for Ireland, Greece and Portugal and also as market speculation
   rose that debt problem may engulf Italy and Spain. Meanwhile reports have indicated the existing bailout
   package was not large enough.

   Meanwhile, better-than-expected European bank stress-test results, released last week also failed to ease debt
   concerns. The European Banking Authority on Friday released its bank stress-test results showing that eight
   banks failed a test of their ability to withstand a prolonged recession. This was better than market
   expectations however it failed to convince market players that debt problems will not intensify.

   European leaders are now scheduled to attend an emergency summit Thursday to discuss these issues. EU
   members are likely to discuss a second bailout for Greece however a decision is unlikely.

   Uncertainty about health of Euro-zone economies has also kept a check on the Euro against the US dollar
   thereby keeping a check on dollar denominated commodities. The Euro trades little changed against the US
   dollar today after a 0.3% slide yesterday. Strength in US dollar makes dollar denominated commodities
   expensive for traders using other currencies.

   Meanwhile uncertainty about global economy has led to choppiness in equity markets. US DJIA index fell 0.8%
   yesterday amid concerns that US policy makers will not come to consensus over debt deal.

   Overall, crude oil has noted mixed trend over last few days indicating lack of direction. However weighing on
   prices is weakening outlook for US and Euro-zone economies and strength in US dollar against the Euro. Focus
   will continue to be on situation in the US and Euro-zone. For US, focus will be on Q2 earnings results,
   economic data and talks on raising debt ceiling. For Euro-zone, focus will be on EU meet later this week.

   Crude oil- MCX Crude may trade with a downward bias tracking cues from international exchange. NYMEX
   crude has recovered from yesterday’s low to trade near $96 per barrel. Supporting crude oil is expectations
   that weekly inventory report may note another decline in US crude oil stocks. Also supporting prices is supply
   disruption in Texas and strike concerns in Nigeria. However weighing on prices are demand concerns on back
   of weakening outlook for the US and Euro-zone amid increasing debt problems. EU debt problems remain
   under scanner as members meet this week on second bailout for Greece. Meanwhile in the US, policy markers
   have failed to reach consensus over raising the national debt ceiling. Also weighing on prices is firmer US
   dollar against the Euro. Focus today will be on US housing data and API US weekly inventory report. Weaker
   data could put more pressure on prices. Support for MCX Crude Aug. contract is seen at Rs.4245 while
   Resistance is seen at Rs.4365.
Energy Daily                      Please See Disclaimer on the Last Page                                      2
   18 July 2011                                       Energy Daily

     Natural Gas

     MCX Natural Gas (Rs/mmBtu)                                       •   NYMEX gas trades higher Tuesday after
      Contract    Open     High      Low      Close   Change              flat close yesterday
       Jul-11     202.7    205.8     200.1    202.6    0.50           •   Hot weather in US supports natural gas
       Aug-11      203      206      200.5    203.2    1.00               price
       Sep-11     204.5    207.7     202.4    204.9    0.80
                                                                  Market Analysis
                                                                  NYMEX natural gas trades marginally higher
     NYMEX Natural Gas (USD/mmBtu)                                Tuesday after a flat close yesterday. Natural gas
      Contract  Open       High      Low      Close   Change      rose as high as $4.612/mmBtu, a level not seen
       Aug-01   4.546      4.612     4.482    4.546    unch       since June 14, but eased back to end on a flat
       Sep-01   4.525      4.586     4.463    4.524    0.004      note.
       Oct-01    4.54       4.6      4.482     4.54    0.005
                                                                  Natural gas started the week on a firm note
       Nov-01   4.645      4.697     4.589    4.644    0.005      after a sharp 8.1% rally last week. Natural gas
       Dec-01   4.821      4.871     4.766    4.822    0.006      has gained sharply over last few days amid
       Jan-01   4.908      4.962     4.864     4.92    0.006      expectations that hot weather in US will
                                                                  increase cooling demand. Meanwhile higher
   price in spot markets indicate good demand.

   As per weather forecasts, heat and humidity is expected over the next week in the US. Hot weather increases
   natural gas consumption as more of the fuel is used to generate electricity needed for cooling.

   Also supporting price is storm activity in the Atlantic. As per NHC update, Tropical Storm Bret formed near
   Florida. This is the second named storm of this season however it is not expected to affect natural gas
   production in the Gulf of Mexico.

   However weighing on prices are expectations of higher production in US. As per EIA short term outlook,
   production is forecast to average 65.4 billion cubic feet a day in 2011, up 5.8% from last year. The forecast
   was up from last month's prediction of 4.5% growth in output.

   Meanwhile the recent recovery in prices also led to an increase rig activity. The number of rigs drilling for gas
   in the U.S. rose by 12 to 885 last week.

   Also US working gas stocks have seen a bigger than expected increase for past two weeks. EIA last week
   noted an 84 Bcf increase in US working gas stocks as against expectations of a 76 Bcf increase.

   Natural gas saw some buying interest as is evident from increase in long positions. As per US CFTC report for
   the week ended July 12, non-commercial traders for natural gas futures raised long position by 3.6% to
   148230 contracts. This is the second consecutive rise in long positions

   Overall, natural gas has seen some buying interest amid heat wave in the US and storm activity in the
   Atlantic. However weighing on prices are expectations of higher production in the US. A sharp rise is unlikely
   unless weather related demand rises substantially or unless a tropical storm threatens production in the Gulf
   of Mexico.


   Natural Gas- MCX Natural gas may note some gains tracking cues from international exchange however upside
   may be limited. NYMEX gas trades firm supported by expectations that hot weather in US will increase cooling
   demand. Also supporting prices is storm activity in the Atlantic as Tropical Storm Bret formed near Florida.
   However the storm is not seen as a threat to natural gas production in the Gulf of Mexico. Also weighing on
   prices is higher production in the US. Support for MCX Natural gas July contract is seen at Rs.197 while
   Resistance is seen at Rs.208.

Energy Daily                         Please See Disclaimer on the Last Page                                      3
   18 July 2011                                         Energy Daily

      Price Movement on NYMEX last week

      Commodity                               Close              change         %             High            Low
      Crude Oil ($/bbl)                      97.24                1.04          1.1          99.21           93.55
      Natural Gas ($/mmBtu)                  4.546                0.341         8.1          4.555           4.182
      Gasoline (cents/gal)                   312.93               3.67          1.2          317.5           302.5
      Heating Oil (cents/gal)                311.8                2.16          0.7          313.71          303.76

      U.S. CFTC Commitments of Traders (COT) Futures Only Report (12 July 2011)

      Non-commercial               Long                Short          Net position        Change        Change (%)
      Position (contracts)
      Crude Oil                   324,437             173,542             150895           12505              9.0
      Natural Gas                 148,230             335,433             -187203         -11678             6.7
      Gasoline                    83,812              17,754               66058           3673              5.9
      Heating Oil                 56,710              27,833               28877           8598              42.4

      U.S. EIA Weekly Petroleum Inventory Report (08 July 2011)

       (1000 barrels)        Stocks        change      %       Expectation   Demand   Change%      Imports   Change%
          Crude Oil          355456         -3124    -0.87       -1800        18513     -3.74       9000       -8.67
           Gasoline          211699          -840    -0.40        200          9016     -3.15        752       7.43
      Distillate Fuel Oil    145028          2967    2.09         400          3324    -11.19        109      -11.38

      U.S. Weekly Natural Gas Storage Report

      Billion Cubic Feet (BCF)     Date     Stocks     Change     change over last year   change over 5-year average
      Natural Gas                 01-Jul    2,527       +95              -8.1%                      -1.9%
      Natural Gas                 08-Jul    2,611       +84              -7.7%                      -2.0%

      U.S. Economic Calendar (11th July to 15th July)

        Date          IST                  Release                    For       Actual      Consensus         Prior
       Jul-18        1930        NAHB Housing Market Index            Jul        15             14             13
       Jul-19        1800              Housing Starts                Jun                       570K           560K
       Jul-19        1800             Building Permits                Jun                      609K           609K
       Jul-20        1930           Existing Home Sales               Jun                     4.93M          4.81M
       Jul-21        1800               Initial Claims              Jul-16                     411K           405K
       Jul-21        1800            Continuing Claims              07-Sep                    3700K          3727K
       Jul-21        1930             Philadelphia Fed                Jul                      0.00           -7.7
       Jul-21        1930            Leading Indicators               Jun                     0.30%          0.80%

Energy Daily                        Please See Disclaimer on the Last Page                                            4
   18 July 2011                                        Energy Daily

                          NYMEX crude oil contract spread chart (price in $/bb)

                  104                                                                         104
                  103                                                                         103
                  102                                                                         102
                  101                                                                         101
                  100                                                                         100
                  99                                                                          99
                  98                                                                          98
                  97                                                                          97
                  96                                                                          96
                  95                                                                          95
                  94                                                                          94
                          1M    2M     3M 4M      5M    6M 7M 8M        9M 10M 11M 12M
                                     Monday               Tuesday           Wednesday
                                     Thursday             Friday

                                      MCX Crude oil spread matrix (Rs/bbl)

                                      Aug         Sep         Oct       Nov       Dec
                          Jul               -39         -83     -121      -178      -222
                          Aug         -                 -44       -82     -139      -183
                          Sep                     -               -38       -95     -139
                          Oct                                 -             -57     -101
                          Nov                                           -             -44
                          Dec                                                           -

                           NYMEX natural gas spread chart (price in $/mmBtu)

                  5.000                                                                     5.000

                  4.900                                                                     4.900

                  4.800                                                                     4.800

                  4.700                                                                     4.700

                  4.600                                                                     4.600

                  4.500                                                                     4.500

                  4.400                                                                     4.400
                           1M 2M 3M 4M 5M 6M 7M 8M 9M 10M 11M 12M
                                  Monday                 Tuesday             Wednesday
                                  Thursday               Friday

                                 MCX Natural gas spread matrix (Rs/mmBtu)

                                                        Aug        Sep
                                            Jul            -0.6       -2.3
                                            Aug            -          -1.7
                                            Sep                    -

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   18 July 2011                                                                          Energy Daily

                    Faiyaz Hudani                                                                           Dharmesh Bhatia
                    Sr. Research Analyst- Spices, Edible Oil                                                Associate Vice-President- Technical Research
                    +91-22-66528837                                                                         +91-22-66528846

                    Sudha R. Acharya                                                                        Amit Sajeja
                    Research Analyst- Edible Oil, Pulses                                                    Sr. Research Analyst- Technical Analyst
                    +91-22-66528809                                                                         +91-22-66528847

                    Madhavi Mehta                                                                           Ajay Baheti
                    Research Analyst- Energy, Bullion                                                       Associate Research- Technical Analyst
                    +91-22-66528857                                                                         +91-22-66528845

                    Priyanka Jhaveri
                    Research Analyst- Base Metals

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