Commodities

Oil and natural gas daily review (October 22, 2012)

Contributed by Angel Broking

Crude Oil

Nymex crude oil prices declined by 2 percent in the last week taking cues from failure of European policymakers to provide further aid to Spain, rise in US crude oil inventories along with strength in the DX.

However, sharp downside in the prices was cushioned as a result of shut in the Keystone pipeline for three days by TransCanada Corporation which transfers 590,000 barrels of oil a day from Canada to midcontinent. Crude oil prices touched a low of $89.79/bbl during the week and closed at $90.05/bbl in the last trading session.

On the domestic bourses, prices declined by 0.1 percent and closed at Rs.4,848/bbl on Friday after touching a low of Rs.4,785/bbl in the last week. However, depreciation in the Indian Rupee prevented sharp fall in the prices.

Natural Gas

On a weekly basis, Nymex natural gas price declined around 0.5 percent on the back of rise in US natural gas inventories coupled with strength in the DX.

However, sharp downside in the prices was restricted on account of expectations of cold weather conditions in coming weeks which will increase the demand for the fuel. Gas prices touched a low of $3.398/mmbtu and closed at $3.579/mmbtu in the last trading session of the week.

On the domestic front, prices gained by 3.26 percent as a result of depreciation in the Indian Rupee and closed at Rs.196.20/mmbtu on Friday after touching a low of Rs.180.30/mmbtu in the last week.

Outlook

We expect crude oil prices to trade with negative bias on the back of ample supplies of US Crude oil inventories along with strength in the DX. Expectations that TransCanada Corp, might resume its operations at its Keystone pipeline today after a second delay which may increase the supplies. Additionally, strength in the DX is expected to add to the gains of the crude oil prices. Depreciation in the Indian Rupee will cushion sharp fall in the prices on the MCX.