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Commodities Energy

Oil and natural gas daily review (January 20, 2014)

January 20, 2014, Monday, 06:02 GMT | 01:02 EST | 10:32 IST | 13:02 SGT
Contributed by Angel Broking

Crude Oil
Nymex crude oil prices gained around 1.8 percent in the last week on the back of decline in Organization of Petroleum Exporting Countries (OPEC) output in the last month. Oil supply from OPEC slipped by 20,000 barrels a day to 29.44 million barrels in December which is below the average of 29.6 million barrels as per the demand estimates of the group for 2014. Further, sharp drop in API and US crude oil inventories which is at the lowest level in 22 months supported an upside in the prices. US crude oil inventories have slipped around 41.2 million barrels in last seven weeks and were biggest fall since 1982 on weekly basis.
Additionally, total fuel consumption rose by 3.5 percent to 78.9 million barrels and rose for the first time in last four weeks. Also, expectations of rise in demand for the fuel after World Bank raising the global growth outlook for 2014 and 2015 acted as a positive factor.
However, sharp upside in the prices was prevented due to restart of production from Sharara in Libya after protestors agreed to postpone their action for two weeks. Even increase in US crude production by 14,000 barrels a day to 8.16 million barrels which is at the highest level since 1988 capped sharp gains in the prices. Also, decline in US refinery operating capacity by 2.3 percent to 90 percent for the week ending on Technical Chart - NYMEX Crude Oil 10th Jan'14 along with cut in Organization of Petroleum Exporting Countries (OPEC) oil demand by 300,000 barrels a day restricted sharp positive movement in the prices.
Further, increase in oil supplies by 1.27 million barrels a day to 55.38 million in 2013 from US, Canada and Brazil along with rising oil production from non-OPEC members and global demand rising at slow pace limited gains in the prices. Crude oil prices touched a weekly high of $94.94/bbl and closed at $94.37/bbl on Friday.
On the domestic bourses, prices gained around 1.3 percent and closed at Rs.5777/bbl on Friday after touching a weekly high of Rs.5829/bbl.
From the intra-day perspective, we expect crude oil prices to trade on a lower note on the back of weak market sentiments due to concerns of QE tapering by the Federal Reserve coupled with strength in the DX will exert downside pressure on the prices. Further, weak economic data from the China led to expectations of decline in demand for the fuel adding downside pressure on the prices. Additionally, decline in demand for OPEC crude oil, rising oil production from non-OPEC members along with increase in US crude output at the highest level since 1988 will act as a negative factor. In the Indian markets, Rupee depreciation will cushion sharp downside in the prices.