Oil and natural gas daily review (January 13, 2014)
January 13, 2014, Monday, 05:24 GMT | 00:24 EST | 09:54 IST | 12:24 SGT
Nymex crude oil prices declined around 1.3 percent in the last week on the back of more than expected rise in US gasoline and distillate inventories. Further, fall in total products demand by 782,000 barrels a day to 18.2 million barrels the least since 7th June’13 coupled with drop in gasoline consumption to 8.27 million barrels a day lowest in last one year exerted downside pressure on the prices.
Additionally, decline in refinery capacity by 0.1 percent which operated at 92.3 percent, rise in US crude production to 8.15 million barrels a day the most since September 1988 acted as a negative factor. Also, crude oil stocks in the US, the biggest oil consumer, are near a 30-year seasonal high thereby signaling towards deteriorating prospects of rise in prices even if demand recovers.
Weakness in the DX coupled with decline in API and EIA US crude oil inventories could not provide respite to the falling prices. Crude oil prices touched a weekly low of $91.24/bbl and closed at $92.72/bbl in last trading session of the week.
On the domestic bourses, prices slipped more than 3 percent and closed at Rs.5704/bbl on Friday after touching a low of Rs.5669/bbl in the last week.
On a weekly basis, natural gas prices fell sharply around 5.7 percent on the back of expectations of a warmer weather conditions in the US, which in turn will lead to decline in demand for the commodity and exerted downside pressure on the prices.
On the MCX, gas prices slipped by more than 8 percent due to appreciation in the Rupee and closed at Rs.251.2/mmbtu on Friday.
From the intra-day perspective, we expect crude oil prices to trade lower on the back of decline in total crude demand of the US and fall in US gasoline consumption which is at the lowest level in last one year. Further, rise in US crude oil production along with rising trend in US distillate and gasoline inventories will exert downside pressure on the prices. Additionally, decline in refinery activity coupled with hedge fund managers cutting their long positions will act as a negative factor. However, sharp downside in the prices will be restricted due to ease in concerns of QE tapering by the Federal Reserve after employment data on Friday along with weakness in the DX. In the Indian markets, Rupee appreciation will continue to add downside pressure on the prices.