Commodities

Oil and natural gas daily review (October 15, 2012)

Contributed by Angel Broking

Crude Oil

Nymex crude oil prices increased by more than 2 percent in the last week taking cues from unrest in the Middle East the region increasing the supply concerns along with favourable economic data from the US. Additionally, expectations of European Union to further tighten sanctions on Iran if talks stall about the country's nuclear program also supported an upside in the prices.

However, sharp positive movement in the prices was capped as a result of more than expectations of rise in US crude oil inventories coupled with strength in the DX. Crude oil prices touched a high of $93.66/bbl during the week and closed at $91.90/bbl in the last trading session of the week.

On the domestic bourses, prices gained by 4.1 percent on account of depreciation in the Indian Rupee and closed at Rs.4,851/bbl on Friday after touching a high of Rs.4967/bbl during the last week.

Natural Gas

On a weekly basis, Nymex natural gas prices gained by more than 5 percent on the back of less than expected rise in US natural gas inventories along with forecast for the cold winter weather which will lead to increase in demand for the fuel.

However, sharp upside in the prices was prevented on account of stronger DX. Gas prices touched a high of $3.638/mmbtu during the week and closed at $3.596/mmbtu in the last trading session.

On the domestic front, prices increased by 8.6 percent as a result of depreciation in the Indian Rupee and closed at Rs.190/mmbtu on Friday after touching a high of $192.40/mmbtu in the last week.

Outlook

We expect crude oil prices to trade on bearish note as the International Energy Agency reduces the global demand forecast as slowing economies is likely to result into reduced consumption. Further, strength in the DX might exert downside pressure on the crude oil prices. However, any renewed tensions in the Middle East would cause disruption in the supplies thereby supporting an upside in the crude oil prices. On the domestic front depreciation in the Indian Rupee will cushion sharp fall in the crude oil prices on the MCX.