Oil and natural gas daily review (January 22, 2014)
January 22, 2014, Wednesday, 06:12 GMT | 02:12 EST | 11:42 IST | 14:12 SGT
Nymex crude oil prices increased around 0.7 percent yesterday on the back of expectations of increase in global crude oil demand by 1.3 million barrels a day to 92.5 million barrels a day in 2014 by International Energy Agency (IEA). Further, agency forecasts that Organization of Petroleum Exporting Countries (OPEC) crude oil demand will increase and need to supply an average of 29.4 million barrels a day in 2014 which is around 200,000 a day more from its previous estimates in last month.
Additionally, total oil inventories monitored by Organization for Economic Cooperation and Development (OECD) were less than five year average in more than a decade as per the IEA. Stockpiles of crude and refined products were at 99.5 million barrels below the five year mean in November at 2.6 billion barrels after as fall of 53.6 million. The decline in inventories was steepest fall since 2011.
However, sharp upside in the prices was prevented due to OPEC production was 400,000 barrels a day higher than its demand in December. The cartel’s supply rose for first time in last five months by 310,000 barrels a day to 29.82 million barrels a day as a result of rise in oil output from Saudi Arabia, Iran and United Arab Emirates.
Saudi Arabia oil output rose by 75,000 barrels a day to 9.82 million barrels a day in last month. Production in Iran started after some relief on sanctions front after temporary curbing its nuclear program increased by 40,000 barrels a day to 2.75 million barrels a day in the last month. On the domestic bourses, prices gained around 1.9 percent due to Rupee depreciation and closed at Rs.5922/bbl after touching an intra-day high of Rs.5948/bbl on Tuesday.
API Inventories Forecast
The American Petroleum Institute (API) is scheduled to release its weekly inventories today and US crude oil inventories are expected to gain by 1.6 million barrels for the week ending on 17th January 2014. Gasoline stocks are expected to gain by 1.6 million barrels and distillate inventories are expected to plunge by 0.4 million barrels for the same week.
From the intra-day perspective, we expect crude oil prices to trade higher on the back of forecast for rise in global crude oil demand by IEA. Further, expectations of rise in OPEC crude oil demand and OECD inventories which is at the lowest level in last five years will support an upside in the prices. However, sharp upside in the prices will be capped due to rise in OPEC production in last month, expectations of rise in API crude and gasoline inventories. In the Indian markets Rupee depreciation will act as a positive factor.