Oil and natural gas daily review (January 27, 2014)
January 27, 2014, Monday, 05:27 GMT | 00:27 EST | 09:57 IST | 12:27 SGT
Nymex crude oil prices jumped by 3.3 percent last week on the back of International Energy Agency (IEA) raising forecasts for global crude oil and 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.
Also, more than expected decline in US distillate inventories as lower temperatures bolstered heating demand. Further, decline in US crude oil production by 107,000 barrels a day to 8.05 million barrels for week ending on 17th Jan’14 coupled with weakness in the DX supported an upside in the prices.
However, positive movement in the prices was prevented due to decline in US refinery capacity by 3.5 percent to 86.5 percent for the last week. Also, weak manufacturing data from the US and China acted as a negative factor.
Additionally, statement from Iran which is fifth largest member of OPEC that it will voluntarily suspend its enrichment of uranium at 20 percent capped sharp gains in the prices. Crude oil prices touched a weekly high of $97.84/bbl and closed at $96.64/bbl in yesterday’s trading session.
On the domestic bourses, prices jumped by around 6 percent due to Rupee depreciation touching a weekly high of Rs.6135/bbl and closed at Rs.6106/bbl on Friday.
From the intra-day perspective, we expect crude oil prices to trade on a mixed note on the back of decline in US and API distillate inventories during the last week which will support an upside in the prices. Further, expectations of rise in demand for fuel due to cool winter weather conditions along with IEA raising the forecast for global crude oil demand will act as a positive factor. While on the other hand, rise in US crude oil and gasoline inventories coupled with fall in US refinery activity will exert downside pressure on the prices. Additionally, weak market sentiments, strength in the DX along with concerns of QE tapering by the Federal Reserve will act as a negative factor. In the Indian markets, Rupee depreciation will cushion sharp fall or support an upside in the prices.