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Commodities Energy

Oil and natural gas daily review (December 04, 2013)

December 4, 2013, Wednesday, 16:22 GMT | 11:22 EST | 20:52 IST | 23:22 SGT
Contributed by Angel Broking


Crude Oil

Crude oil prices jumped to a one-month high on Tuesday on news that a new pipeline would start carrying oil to refineries in Texas. This news came as a positive factor as movement of oil from Cushing, Oklahoma (the delivery point for Nymex oil futures) would translate into a decline in inventories. Currently, inventories are at their highest since the month of July’13 and on the back of this, prices on Nymex are taking a beating. But this new pipeline is likely to bring a turnaround in oil prices in the coming months. TransCanada’s Keystone Gulf Coast Pipeline will begin carrying crude oil from Cushing, Oklahoma to Port Arthur, Texas on 3rd Jan’14. The pipeline has a capacity of carrying 700,000 bbl/day of crude oil.

Other than this, crude oil prices also received support from the API (American Petroleum Institute) data that showed a sharp decline of 12.4 million barrels in crude oil inventories for the last week, snapping a back-to-back 10 week rise in inventories. This factor too added support to prices, which gained around $2 in Tuesday’s trade alone.

API Inventories Forecast

As per the American Petroleum Institute (API) report last night, US crude oil inventories declined sharply by 12.4 million barrels to 377.80 million barrels for the week ending on 29th November 2013. Gasoline inventories dropped by 119,000 barrels to 216.18 million barrels and whereas distillate inventories shoot up by 540,000 million barrels to 114.30 million barrels for the same week.

EIA Inventories Forecast

The US Energy Department (EIA) is scheduled to release its weekly inventories report today at 9:00pm IST and US crude oil inventories is expected to rise by 0.3 million barrels for the week ending on 29th November 2013. Gasoline stocks are expected to gain by 1.5 million barrels whereas distillate inventories are expected to plunge by 1.8 million barrels for the same period.


Outlook

From the intra-day perspective, we expect crude oil prices to trade higher on the back of sharp decline in API crude oil inventories in yesterday’s trade. Further, estimates of Keystone new pipeline will start carrying oil to refineries from 3rd Jan’14 will support an upside in prices. However, sharp upside in prices will be capped due to forecast for rise in US crude oil inventories, weak market sentiments along with strength in the DX. In the Indian markets, Rupee depreciation will support an upside in the prices.