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Commodities Energy

Oil and natural gas daily review (July 21, 2014)

July 21, 2014, Monday, 11:18 GMT | 06:18 EST | 14:48 IST | 17:18 SGT
Contributed by Angel Broking


Crude Oil

Nymex crude prices jumped by more than 2 percent last week owing to renewed violence in Libya that raised questions about the production from the nation. Meanwhile, protesters have shut down production at the eastern Libyan oil port of Brega, state firm National Oil Corp (NOC) said.

Oil prices received further support from strong Chinese economic data. The country's economy expanded at a 7.5 percent annual pace in the second quarter as a result of government stimulus measures, signaling expectations of increasing demand.

Despite ongoing fighting between militias in Tripoli, Libya's oil output has risen to 588,000 barrels per day (bpd), an increase of around 25 percent since the weekend.

The market also kept an eye on talks in Vienna over Tehran's nuclear program. Iran's oil supplies have been restricted by sanctions for several years, but an agreement could lead to a softening, or lifting, of those limits. Negotiators have set a July 20 deadline for a deal, but diplomats say the two sides are deeply divided and assume the talks will be given another six months.

On the domestic bourses, prices gained by 2.2 percent. Crude prices closed at Rs.6209/bbl on Friday after touching a weekly high of Rs.6264/bbl.


Outlook

On an intraday basis, we expect crude oil prices to trade on a positive note continuing its gains from the previous session. Escalating tensions with additional sanctions imposed on Russia by the US will push crude prices higher.

However, sharp upside will be capped as money managers slashed their net long U.S. crude futures and options positions on New York and London exchanges by second-largest decline since the Commodity Futures Trading Commission (CFTC) began reporting the data in 2009.

On the MCX, crude prices are expected to trade on a positive note taking cues from strong international markets.