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					   22 July 2011                                          Energy Daily

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    FOR PRIVATE CIRCULATION ONLY                                                                      22 July 2011


   Crude Oil                                                        Highlights
   MCX Crude Oil (Rs/barrel)
                                                                        •   NYMEX crude hold above $99/bbl Friday
    Contract  Open         High        Low      Close      Change
                                                                            after 0.7% gain yesterday
     Aug-11    4377        4462        4344     4445        73.00
                                                                        •   Firmness in equity markets and IEA
     Sep-11    4417        4501        4385     4483        68.00           announcement to not release additional
     Oct-11    4478        4545        4433     4528        66.00           crude stocks supports crude oil prices
                                                                        •   The US dollar index trades marginally
   NYMEX WTI Crude Oil (USD/barrel)                                         higher today after 1% slide yesterday
    Contract  Open        High         Low      Close      Change       •   Asian equity markets trade higher after
     Sep-01   98.36      100.16         97.2    99.13       0.73            sharp gains in US yesterday
     Oct-01   98.75      100.52        97.59     99.46      0.68        •   Euro-zone leaders struck a deal on a
     Nov-01    99.4      100.89        98.03     99.85      0.63            second bailout package for Greece
     Dec-01    99.9       101.3         98.5    100.25      0.59        •   US initial jobless claims rose by 10000 to
     Jan-01   99.97      101.62        99.05    100.63      0.54            418000 in the week ending July 16
     Feb-01  100.55      101.95        99.36      101       0.49        •   US Philadelphia Fed manufacturing index
                                                                            rose to 3.2 in July from -7.7 a month ago
                                                                        •   US index of leading economic indicators
   ICE Brent Crude Oil (USD/barrel)
                                                                            climbed 0.3% in June after 0.2% rise last
    Contract    Open       High        Low      Close      Change
                                                                            month
     Sep-01     118.35    119.25      116.62    117.51      -0.64       •   ICE Brent crude Sept contract ended at
     Oct-01     118.22    119.15      116.61    117.44      -0.63           premium of $18.38/bbl on Thursday as
     Nov-01      118.3    119.22      116.75    117.54      -0.63           against $19.75/bbl a day earlier
     Dec-01     118.15    119.26       116.8     117.6      -0.62
     Jan-01     118.33    119.07      116.99    117.59      -0.62   Market Analysis
     Feb-01     118.25    119.12       117.1    117.52      -0.62   NYMEX crude oil trades in a narrow range over
                                                                    $99 per barrel Friday after a 0.7% rise
   NYMEX Heating Oil (USD cents/gallon)                             yesterday. Crude oil rose as high as $100.16/bbl
    Contract  Open        High       Low        Close      Change   in intraday trade yesterday, a level not seen
     Aug-11   311.35     314.33     308.52      309.92      -1.92   since June 10, but shed some of the gains to
     Sep-11   312.67     315.77     309.71      311.29      -1.91   settle around $99 per barrel.
     Oct-11   314.09     317.07     311.83      312.73      -1.88
                                                                    Crude oil rose yesterday amid optimism across
                                                                    markets as Euro-zone members took measures
   NYMEX Gasoline (USD cents/gallon)
                                                                    to support Greece and other debt ridden nations
    Contract  Open       High        Low        Close      Change   and as US debt deal talks continue. Optimism
     Aug-11  314.56     315.72     308.95       309.95      -4.75   about Euro-zone economies pushed US dollar
     Sep-11  309.23     310.69     304.73       305.67      -3.79   higher lending further support to dollar
     Oct-11  295.88      297.4     291.42       292.85      -2.77   denominated commodities. Crude oil got further
                                                                    boost from IEA’s announcement that it will not
   release more emergency reserves into the market.

   NYMEX crude also got a boost from shift in buying interest from Brent to WTI. NYMEX crude ended higher
   yesterday while Brent crude fell 0.5% following which the spread between the two narrowed. The premium of
   ICE Brent crude Sept contract over WTI crude narrowed to $18.38/bbl yesterday as against $19.75/bbl a day
   earlier. At current price, the spread between the two stands at $18.36/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 as drop in US crude oil stocks lent some support to WTI prices. While WTI crude ended
   higher yesterday, gasoline and distillate futures ended lower yesterday narrowing the crack spread. The 3-2-1
   crack spread narrowed to $31.04/bbl from $33.63/bbl a day earlier.


Energy Daily                          Please See Disclaimer on the Last Page                                       1
   22 July 2011                                        Energy Daily
   Optimism rose after EU members took a step forward to deal with the debt problems engulfing regional
   economies. EU members agreed on second bailout package for Greece and took steps to reduce the debt
   burdens of Greece, Portugal and Ireland.

   As per reports, the deal includes a package for Greece amounting to 159 billion euro ($229 billion) in aid,
   including official loans and contributions from the private sector. The draft agreement said the euro zone
   would reduce interest rates on European Financial Stability Facility loans to 3.5%, while extending loan
   maturities to at least 15 years. The plan is seen applying to Greece as well as Portugal and Ireland.

   EU members lacked consensus over second bailout for Greece however yesterday’s meet indicates a step
   forward calming market fears that the nation will default. Meanwhile market reports noted that talks on raising
   US debt ceiling is progressing.

   Optimism on back of EU’s decision to support Greece pushed equity markets higher. Meanwhile Euro and other
   riskier currencies edged up. Asian equity markets trade higher today tracking gains in US markets yesterday.
   US DJIA index gained 1.2% yesterday.

   The Euro trades marginally lower against the US dollar today after a sharp 1.4% rise yesterday. Weakness in
   US dollar makes dollar denominated commodities cheaper for traders using other currencies.

   Crude oil also got a boost from IEA’s announcement that it will not release more emergency reserves in the
   market. The IEA said June 23 that it would release 60 million barrels of oil in a bid to lower prices. Meanwhile
   some believed that the group will release more stocks. However IEA stated yesterday that it will not release
   more stocks into the market as they believe that producers have started pumping more.

   However weighing on prices is demand concerns as uncertainty persists about major economies. EU’s decision
   yesterday indicates that the group will continue to take steps to ease debt problems. However Euro-zone debt
   problems are far from over. Greece, Ireland and Portugal are under pressure to meet austerity measures to
   continue getting financing from EU. Meanwhile some fear that debt problems may engulf Italy and Spain as
   well. Meanwhile some expect that EU aid package will be expanded

   Meanwhile uncertainty persists about US economy as economic data remains mixed. Meanwhile uncertainty
   persists whether debt deal will be passed in time. The U.S. will reach its maximum legal borrowing limit in
   early August unless Congress and the White House can agree to raise it. There is debate about how to attach a
   long-term deficit-reduction plan to any increase in the debt ceiling.

   Expectations that deal will be reached rose after reports noted that President Barack Obama and House of
   Representatives Speaker John Boehner (R., Ohio) were close to agreeing to a $3 trillion budget deal. However
   enthusiasm sapped after Speaker John Boehner denied reports a U.S. budget bargain was near.

   Overall, crude oil is holding in a broad range after recent rise. Supporting prices is rally in equity markets after
   EU members agreed on second bailout for Greece and additional measures to curb contagion fears. Meanwhile
   also supporting prices is expectation that US debt deal will be reached. Additional support comes in from IEA’s
   decision to not release more stocks into the market. However uncertainty about US and Euro-zone economy
   will keep a check on any sharp rally in crude oil prices. Focus will continue to be on situation in the US and
   Euro-zone.

   Outlook
   Crude oil- MCX Crude may note some gains tracking cues from international exchange however upside is
   limited. NYMEX crude trades above $99 per barrel after a sharp rise yesterday. Supporting prices is optimism
   in the market as policymakers in Euro-zone moved closer to an agreement on a new plan to tackle Greek debt
   problems. Meanwhile talks continue to raise debt ceiling in the US. This has also pushed Euro higher against
   the US dollar lending further support to dollar denominated commodities. Also supporting crude oil is IEA’s
   announcement that it will not release more reserves in the market. While crude oil trades higher, upside may
   be limited by continuing concerns about health of US and Euro-zone economies amid mixed economic data and
   as debt problems are far from over. With no major economic data due today, trend in equity and currency will
   determine market direction for crude oil. Support for MCX Crude Aug. contract is seen at Rs.4375 while
   Resistance is seen at Rs.4495.
Energy Daily                        Please See Disclaimer on the Last Page                                         2
   22 July 2011                                       Energy Daily

     Natural Gas
                                                                  Highlights

     MCX Natural Gas (Rs/mmBtu)                                       •   NYMEX natural gas trades mixed after
      Contract   Open      High      Low     Close   Change               2.3% slide yesterday
       Jul-11    201.3      204      194.5   195.4    -6.60           •   EIA noted a 60 Bcf increase in US
       Aug-11     201      203.9     194.8   195.5    -6.60               working gas stocks
       Sep-11    202.9      205      196.9   197.6    -6.20
                                                                  Market Analysis
                                                                  NYMEX natural gas trades mixed today after a
     NYMEX Natural Gas (USD/mmBtu)                                2.3% slide yesterday which marked its third
      Contract  Open       High      Low     Close   Change       consecutive decline. Natural gas rose as high as
       Aug-01   4.499      4.594     4.373   4.395    -0.105      $ $4.594/mmBtu in intraday trade but failed to
       Sep-01   4.469      4.562     4.342   4.362    -0.107      breach the $4.6/mmBtu level and fell sharply to
       Oct-01   4.486      4.572     4.358   4.377    -0.106      end with a decline of 2.3%.
       Nov-01   4.599      4.663     4.466   4.483    -0.102
                                                               Natural gas has come under pressure amid
       Dec-01   4.771      4.827     4.647   4.663    -0.096   some profit taking after recent gains. Natural
       Jan-01   4.842      4.934     4.748   4.766    -0.090   gas has gained sharply over last few days amid
                                                               expectations of warm weather in the US
   however forecasts indicate that weather may improve over next few days. Hot weather in US has increase
   cooling demand and this is evident from higher spot prices.

   Natural gas also got a boost from storm activity in the Atlantic as two tropical storms formed this week.
   However none of these weather patterns are seen threatening natural gas production in the Gulf of Mexico.

   As per reports, record heat from the Midwest to the East is expected from now through the weekend, and heat
   indexes in some areas have surpassed 100 degrees. However forecasts note that temperatures will return
   closer to normal in the six- to 10-day forecast but will then rise again to above-normal levels.

   As per NHC update, tropical storm Bret has weakened to tropical depression level near US East Coast.
   Meanwhile tropical storm Cindy remains active in the far northeast Atlantic. Meanwhile a weather pattern as
   formed near Windward Islands with a 10% chance of forming into a storm.

   Natural gas failed to rally yesterday even as EIA noted a smaller than expected increase in US working gas
   stocks. EIA noted a 60 Bcf increase in stocks as against expectations of 62 Bcf. The stocks build was also
   smaller than the 5-year average build of 67 Bcf for this time of the year but higher than 55 Bcf pushed into
   storage same period last year.

   Also 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.

   Overall, natural gas has come under pressure after failing to breach the high set earlier this week. Weighing
   on prices is lack of threat from storm activity in the Atlantic and expectations that near term hot weather in
   the US will be followed by near normal weather.

   Outlook

   Natural Gas- MCX Natural gas may note some decline tracking cues from international exchange however
   downside is limited. NYMEX natural gas has eased a bit amid some profit taking after recent gains. EIA noted a
   60 Bcf increase in US working gas stocks which was slightly below market expectations of 62 Bcf increase.
   Also weighing on prices is lack of threat to natural gas production due to tropical storms in the Atlantic.
   However natural gas is likely to gain support from expectations of hot weather in some parts of the US over
   next few days. Support for MCX Natural gas July contract is seen at Rs.191 while Resistance is seen at Rs.202.
Energy Daily                         Please See Disclaimer on the Last Page                                      3
   22 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 (15 July 2011)

       (1000 barrels)        Stocks        change      %       Expectation   Demand   Change%      Imports   Change%
          Crude Oil          351729         -3727    -1.05       -1700        18853     1.84        9343       3.81
           Gasoline          212456          757     0.36         -100        9028      0.13         881       17.15
      Distillate Fuel Oil    148460          3432    2.37         1300         3402     2.35         92       -15.60

      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                 08-Jul    2,611       +84              -7.7%                      -2.0%
      Natural Gas                 15-Jul    2,671       +60              -7.4%                      -2.2%

      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        629K           570K           549K
       Jul-19        1800             Building Permits               Jun        624K           609K           609K
       Jul-20        1930           Existing Home Sales               Jun       4.77M         4.93M          4.81M
       Jul-21        1800               Initial Claims              Jul-16      418K           411K           408K
       Jul-21        1800            Continuing Claims              07-Sep      3698K         3700K          3748K
       Jul-21        1930             Philadelphia Fed                Jul        3.2           0.00           -7.7
       Jul-21        1930            Leading Indicators              Jun        0.3%          0.30%          0.20%




Energy Daily                        Please See Disclaimer on the Last Page                                            4
   22 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)

                               Sep          Oct          Nov        Dec       Jan
                   Aug               -38          -83      -128       -180       -205
                   Sep         -                  -45        -90      -142       -167
                   Oct                      -                -45        -97      -122
                   Nov                                   -              -52       -77
                   Dec                                              -             -25
                   Jan                                                              -

                           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
                  4.300                                                                   4.300
                           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            -0.1        -2.2
                                      Aug            -           -2.1
                                      Sep                     -
Energy Daily                   Please See Disclaimer on the Last Page                             5
   22 July 2011                                                                          Energy Daily




                    Faiyaz Hudani                                                                           Dharmesh Bhatia
                    Sr. Research Analyst- Spices, Edible Oil                                                Associate Vice-President- Technical Research
                    faiyaz.hudani@kotakcommodities.com                                                      dharmesh.bhatia@kotakcommodities.com
                    +91-22-66528837                                                                         +91-22-66528846




                    Sudha R. Acharya                                                                        Amit Sajeja
                    Research Analyst- Edible Oil, Pulses                                                    Sr. Research Analyst- Technical Analyst
                    sudha.acharya@kotakcommodities.com                                                      amit.sajeja@kotakcommodities.com
                    +91-22-66528809                                                                         +91-22-66528847




                    Madhavi Mehta                                                                           Ajay Baheti
                    Research Analyst- Energy, Bullion                                                       Associate Research- Technical Analyst
                    madhavi.mehta@kotakcommodities.com                                                      ajay.baheti@kotakcommodities.com
                    +91-22-66528857                                                                         +91-22-66528845




                    Priyanka Jhaveri
                    Research Analyst- Base Metals
                    priyanka.jhaveri@kotakcommodities.com
                    +91-22-66528848




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