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					   22 Sept 2011                                          Energy Daily


    FOR PRIVATE CIRCULATION ONLY                                                                      22 Sept 2011

   Crude Oil                                                        Highlights
   MCX Crude Oil (Rs/barrel)
                                                                        •   NYMEX crude falls more than 2%
    Contract  Open         High        Low      Close      Change
                                                                            Thursday extending yesterday 1.1% slide
     Oct-11    4172        4262        4151     4209        39.00
                                                                        •   Weakness in equity markets and strength
     Nov-11    4198        4290        4181     4238        38.00           in US dollar weigh on crude oil
     Dec-11    4228        4310        4215     4268        35.00       •   The US dollar index higher today after
                                                                            0.9% gain yesterday
   NYMEX WTI Crude Oil (USD/barrel)                                     •   Asian equity markets trade weaker
    Contract  Open       High          Low      Close      Change           tracking losses in US markets yesterday
     Nov-11   86.51      87.99         84.92    85.92       -1.00       •   Market reacted to Fed’s downbeat
     Dec-11   86.72      88.24         84.91    86.18       -0.99           economic assessment for US economy
     Jan-12   87.14      88.49         85.27    86.46       -0.97       •   Fed kept interest rate unchanged at 0-
     Feb-12    87.4      88.69         85.55    86.73       -0.95           0.25% but stated significant downside
     Mar-12   87.64       88.8         85.87     87         -0.94           risks to the economy
     Apr-12    88.1      89.07         86.07    87.28       -0.94       •   Fed will launch a $400 bn program to
                                                                            twist balance sheet towards long term
   ICE Brent Crude Oil (USD/barrel)
                                                                        •   EIA noted a 7.336 mn bbl decline in US
    Contract    Open       High        Low      Close      Change
                                                                            crude oil stocks as against forecast of 0.7
     Nov-11     110.25    112.44      108.92    110.36      -0.18
                                                                            mn bbl decline
     Dec-11     108.91    110.94      107.38    108.87      -0.39       •   US existing home sales rose by 7.7% to
     Jan-12     107.99      110       106.61    108.02      -0.48           5.03 million in Aug
     Feb-12     107.51    109.46      106.51    107.51      -0.54       •   ICE Brent crude Nov contract ended at
     Mar-12     107.22    109.13      105.82    107.18      -0.56           premium of $24.44/bbl on Wednesday as
     Apr-12     106.99    108.73      105.87    106.94      -0.56           against $23.62/bbl a day earlier
                                                                        •   Focus today on US weekly jobless claims
   NYMEX Heating Oil (USD cents/gallon)                                     and leading indicators data
    Contract  Open        High       Low        Close      Change
     Oct-11   295.31     300.19     290.93      293.42      -2.74   Market Analysis
     Nov-11   296.3      301.13     292.05      294.52      -2.61
     Dec-11   297.51     301.66     292.88      295.33      -2.53   NYMEX crude dropped more than 2% to trade
                                                                    near $84 per barrel Thursday extending
                                                                    yesterday’s 1.1% slide. Crude slipped as low as
   NYMEX Gasoline (USD cents/gallon)
                                                                    $84.05/bbl in intraday trade today, the lowest
    Contract  Open       High        Low        Close      Change
                                                                    level seen since Sept 6.
     Oct-11   270.3      273.7       264        266.65      -3.49
     Nov-11   268.5      272.3       263        265.64      -2.79
                                                                Crude oil continues to take cues from trend in
     Dec-11  266.64     270.74     261.71       264.32      -2.64
                                                                equity markets as has been the recent trend.
                                                                Asian equity markets are trading weaker today
   after a sharp drop in US markets yesterday. US DJIA index dropped more than 2% yesterday.

   Equity markets plunged reacting to Fed’s decision yesterday. Fed announced a twist to its balance sheet which
   was largely in line with market expectations. Market however reacted to Fed’s downbeat assessment about the
   economy. The US is world’s biggest crude oil consumer and uncertainty about the economy will fuel demand

   Also weighing on crude oil prices is strength in the US dollar. Strength in the US dollar makes dollar
   denominated commodities expensive for traders using other currencies. The US dollar index rose as high as
   78.063 today, the highest level seen since Feb. The index gained 0.9% yesterday. The US dollar rose sharply
   yesterday after Fed’s announcement of operation twist. The move is expected to increase short term interest
   rates and spur economic growth. The currency also gained as Fed did not move to infuse more liquidity in the
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   22 Sept 2011                                       Energy Daily

   The US Fed yesterday kept federal fund rate unchanged at 0 to 1/4 percent and anticipates that economic
   conditions are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
   In a move to support the economy, Fed would launch a $400 billion program to twist its $2.85 trillion balance
   sheet more heavily toward longer-term securities by selling short-term government debt to purchase longer-
   date Treasuries. The move will shift the interest rate curve but will not infuse more liquidity in the economy as
   in its previous moves of quantitative easing.

   Meanwhile, Fed acknowledged that there are significant downside risks to the economic outlook. This is a shift
   from its previous stance when it stated that downside risks to the economic outlook have increased.

   Fed’s downbeat economic assessment adds to mixed US economic data released over last few days. US
   housing data released this week was mixed. US housing starts were below market expectations while building
   permits and existing home sales showed improvement. US existing home sales rose 7.7% last month to 5.03
   million as against expectations of a reading of 4.7 million. Meanwhile, Moody’s downgraded the credit of Bank
   of America, Wells Fargo and Citigroup saying it saw the US government less willing than before to rescue them
   if they become unstable.

   While market reaction to Euro-zone debt problems have subdued amid EU officials stance of supporting debt
   ridden economies, concerns persist that debt problems may engulf major economies like Italy and Spain.
   Concerns about Greek default were high after talks of next tranche of EU-IMF loan failed to succeed. In a bid
   to get the financing, Greek government on Wednesday announced additional austerity measures, including
   scaling back the public sector and cutting pensions. Greek austerity measures have already led to public
   outage and slowdown in growth. Greece is most likely to get its next loan tranche however uncertainty will
   persist until then. Meanwhile recent Chinese economic data indicates slowdown in growth. HSBC's preliminary
   China Manufacturing Purchasing Managers' index fell to two-month low of 49.4 in September, easing from
   49.9 in August.

   While weakness in equity markets and strength in the US dollar weighed on crude oil prices, EIA’s weekly
   report was supportive as it noted a bigger than expected decline in US crude oil stocks. EIA noted a 7.336 mn
   bbl decline in US crude oil stocks as against expectations of a 0.7 mn bbl decline. Crude stocks fell amid a
   2.2% decline in imports and 1.3% increase in refinery usage. While crude stocks fell, EIA noted a 3.295 mn
   bbl increase in gasoline stocks as against forecast of a 1.2 mn bbl decline. Distillate stocks fell by 0.874 mn
   bbl as against forecast of a 1 mn bbl decline. Meanwhile, demand improved last week. Crude oil demand, as
   measured by total product supplied averaged 19.024 mn bpd which is 2% higher than last week. Gasoline
   demand rose 0.1% to average 8.858 mn bpd while distillate demand rose 5.9% to average 3.875 mn bpd.

   While both WTI and Brent are under pressure today, Brent has fallen more than WTI following which the
   spread between the two has narrowed. The premium of ICE Brent crude over WTI stands at $24.12/bbl at
   current price as against $24.44/bbl at yesterday’s close. The spread narrowed as US crude oil stocks fell more
   than expectations. However Brent crude is likely to gain support from supply concerns in North Sea.

   Overall, crude oil trades weaker weighed down by weakness in equity markets and strength in the US dollar.
   However we do not expect a sustained rally in US dollar amid weaker economic outlook for US economy. Also
   some believe that Fed’s move to lower longer term interest rates will not be effective to spur growth. Trend in
   equity and currency market will continue to be key price determining factor for crude oil and focus will be on
   US economic data.

   Crude oil- MCX Crude may note some decline tracking cues from international exchange. NYMEX crude trades
   weaker weighed down by weakness in equity markets and strength in US dollar. Equity markets are under
   pressure following Fed’s downbeat assessment for the US economy. Meanwhile dollar has strengthened as Fed
   did not announce further liquidity infusion in the market and as twist in the Fed balance sheet is expected to
   result in higher short term rates. However crude oil may gain support from EIA report which noted a bigger
   than expected decline in US crude oil stocks. Trend in equity and currency markets will continue to determine
   trend in crude oil prices. Focus today will be on US weekly jobless claims and leading indicators data. Support
   for MCX Crude Oct. contract is seen at Rs.4050 while Resistance is seen at Rs.4235.
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   22 Sept 2011                                       Energy Daily

     Natural Gas

     MCX Natural Gas (Rs/mmBtu)                                      •   NYMEX natural gas trades weaker after
      Contract   Open      High      Low     Close   Change              1.8% decline yesterday
       Sep-11    183.1     183.7     180.7   181.1    -2.60          •   EIA expected to note a 91 Bcf increase in
       Oct-11    187.4      189      186.1   186.5    -2.60              US working gas stocks
       Nov-11    201.5     201.8     199.6   200.4    -1.60
                                                                  Market Analysis
                                                                  NYMEX natural gas trades weaker Thursday
     NYMEX Natural Gas (USD/mmBtu)                                after a 1.8% slide yesterday which marked its
      Contract  Open       High      Low     Close   Change       second consecutive decline.
       Oct-11   3.781      3.799      3.71    3.73    -0.07
       Nov-11   3.878      3.886     3.796    3.82    -0.07       Natural gas trades weaker weighed down by
       Dec-11   4.138      4.146     4.078   4.099    -0.04       mixed weather forecasts, concerns about health
                                                                  of US economy, expectations of higher
       Jan-12   4.282      4.291     4.233   4.252    -0.03
                                                                  production in US and lack of immediate storm
       Feb-12   4.308      4.309     4.255   4.268    -0.04       threat.
       Mar-12   4.279      4.281      4.22   4.238    -0.04
                                                               Also weighing on prices is expectations that EIA
   may note a bigger than average increase in US working gas stocks. EIA is expected to note a 91 Bcf increase
   in stocks. The 5-year average increase for this time of the year is 72 Bcf while 78 Bcf was injected same
   period last year.

   As per Reuters report, the US National Weather Service six- to 10-day outlook issued on Sunday again called
   for above-normal readings for most of the western two-thirds of the nation stretching across northern-tier
   states and mostly normal or below-normal readings in the Southeast. Weather related demand is expected to
   remain slack until winter demand sets in.

   Also weighing on prices is lack of immediate storm threat. At present, tropical storm Ophelia has formed in the
   Atlantic however it is far from land and it is uncertain whether it will move towards the Gulf of Mexico.

   Also weighing on prices are expectations of higher production in the US. In its September Short Term Energy
   Outlook, the EIA said it expected marketed production to rise by 4 billion cubic feet per day to a record 65.8
   Bcfpd, up from its previous estimate of a 3.68 Bcfpd increase.

   The sharp rise in rig activity also indicates higher production interest. The number of rigs drilling for natural
   gas in the US rose by 20 to 912 rigs last week.

   Also weighing on prices is weakening outlook for US economy amid mixed economic data. Slowdown in the
   economy will affect industrial demand. US Fed yesterday acknowledged downside risks to the economy.

   Overall, natural gas trades weaker amid slack weather related demand and expectations of higher production
   in the US. With the nearing end of summer, natural gas will enter lull demand season until winter demand
   picks up.


   Natural Gas- MCX Natural gas may note some decline tracking cues from international exchange. NYMEX gas
   trades weaker weighed down by mixed weather forecasts, weakening outlook for the economy and
   expectations of another bigger than average increase in US working gas stocks. EIA is expected to note a 91
   Bcf increase in US natural gas stocks which is higher than the 5-year average increase of 72 Bcf. Focus today
   will be on weekly inventory report. Apart from it, focus will also be on US economic data and storm activity in
   the Atlantic. Support for MCX Natural gas Sept contract is seen at Rs.177 while Resistance is seen at Rs.185.

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   22 Sept 2011                                         Energy Daily

      Price Movement on NYMEX last week

      Commodity                               Close              change          %            High            Low
      Crude Oil ($/bbl)                      87.96                0.72          0.8          90.52             85
      Natural Gas ($/mmBtu)                  3.809               -0.106         -2.7         4.099           3.791
      Gasoline (cents/gal)                   278.41               1.31          0.5          283.84          268.44
      Heating Oil (cents/gal)                300.89               2.31          0.8          305.1           290.13

      U.S. CFTC Commitments of Traders (COT) Futures Only Report (13 Sept 2011)

      Non-commercial                Long               Short          Net position        Change        Change (%)
      Position (contracts)
      Crude Oil                   335,221             169,826             165395            253               0.2
      Natural Gas                 143,100             326,800             -183700          -683               0.4
      Gasoline                    75,375              31,533               43842          -9932              -18.5
      Heating Oil                 47,215              38,510                8705          -8870              -50.5

      U.S. EIA Weekly Petroleum Inventory Report (16 Sept 2011)

       (1000 barrels)        Stocks        change      %       Expectation   Demand     Change%    Imports   Change%
          Crude Oil          339048         -7336    -2.12        -700        19024       1.98      8351       -2.24
           Gasoline          214075          3295    1.56         1200         8858       0.11       692       5.01
      Distillate Fuel Oil    157606          -874    -0.55        1000         3875       5.93       158       2.60

      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                 02-Sept   3,025       +64              -4.2%                      -1.9%
      Natural Gas                 09-Sept   3,112       +87              -4.3%                      -1.6%

      U.S. Economic Calendar (19 Sep to 23 Sept)

        Date          IST                  Release                   For       Actual      Consensus          Prior
       Sep-19        1930        NAHB Housing Market Index          Sep          14            15              15
       Sep-20        1800              Housing Starts               Aug         571K          590K            601K
       Sep-20        1800             Building Permits              Aug         620K          585K            601K
       Sep-21        1930           Existing Home Sales             Aug        5.03M         4.70M           4.67M
       Sep-21        2345           FOMC Rate Decision              Sep        0.25%         0.25%           0.25%
       Sep-22        1800               Initial Claims             Sep-17                     418K            428K
       Sep-22        1800            Continuing Claims             09-Oct                    3730K           3726K
       Sep-22        1930            Leading Indicators             Aug                      0.10%           0.50%

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   22 Sept 2011                                      Energy Daily

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

                  92                                                                        92

                  91                                                                        91

                  90                                                                        90

                  89                                                                        89

                  88                                                                        88

                  87                                                                        87

                  86                                                                        86

                  85                                                                        85
                       1M    2M    3M 4M        5M    6M 7M 8M          9M   10M 11M 12M
                                  Monday                Tuesday               Wednesday
                                  Thursday              Friday

                                    MCX Crude oil spread matrix (Rs/bbl)

                              Nov         Dec         Jan        Feb         Mar
                   Oct        -29         -59         -124       -150        -130
                   Nov        -           -30         -95        -121        -101
                   Dec                    -           -65        -91         -71
                   Jan                                -          -26         -6
                   Feb                                           -           20
                   Mar                                                       -

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

                  4.500                                                                  4.500
                  4.400                                                                  4.400
                  4.300                                                                  4.300
                  4.200                                                                  4.200
                  4.100                                                                  4.100
                  4.000                                                                  4.000
                  3.900                                                                  3.900
                  3.800                                                                  3.800
                  3.700                                                                  3.700
                            1M 2M 3M 4M 5M 6M 7M 8M 9M 10M 11M 12M
                                  Monday               Tuesday               Wednesday
                                  Thursday             Friday

                               MCX Natural gas spread matrix (Rs/mmBtu)

                                                Oct          Nov
                                    Sep              -5.4      -19.3
                                    Oct              -         -13.9
                                    Nov                      -

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   22 Sept 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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