05 August 2013

Market Commentary

ENERGY - Weekly Market Data

Exchange Spot ICE-Brent NYMEX -

WTI NYMEX - NAT GAS

Contract Cushing -

USA Sep Sep Sep

Open 105.09 107.19 104.61 3.54

High 107.89 110.09 108.82 3.54

Low 102.89 105.73 102.67 3.33

Close 106.94 108.95 106.94 3.35

Change 2.24 1.78 2.24 -0.216

Percent Chg 2.14% 1.66% 2.14% -6.06%

Volume NA 957100 1241188 540373

Open Interest NA 233653 328463 287900

Change NA -33246 -37160 -9897

Pivot 105.91 108.26 106.14 3.41

Resistance 108.92 110.78 109.62 3.48

Support 103.92 106.42 103.47 3.27

Last week, oil started on a steady note and traded

positive as a host of economic data and events from

across the globe acted as catalysts to upward price

momentum. As investors looked to a Federal Re-

serve meeting for clues concerning the outlook for

the U.S. monetary-stimulus programme, oil prices

gained momentum. U.S. manufacturing grew in July

at its fastest in two years, while a China industrial

index beat expectations last week. European factories

also snapped two years of output declines, suggest-

ing a euro zone recession may be near its end. Up-

beat economic data raised prospects of better global

oil demand amid supply disruptions in Africa and

Iraq. Overall for the week Brent posted a high of

$110.09 and a low of $105.73, gaining 1.66%, while

WTI made a high of $108.82 and a low of $102.67,

posting gains of 2.14%. On the MCX, WTI crude

gained 5.23% to close at Rs.6,523 a ton.

DOMESTIC - Weekly Market Data

Exchange MCX

Crude NCDEX Brent

MCX Nat Gas

INR/USD

Contract Aug Aug Aug India

Open 6202 6350 212.6 59.03

High 6637 6735 213.2 61.33

Low 6186 6350 203.7 59.01

Close 6523 6694 204.6 61.11

Change 324.00 344.00 -8.30 2.06

Percent Chg 5.23% 5.42% -3.90% 3.49%

Volume 570074 97 214175 NA

Open Interest 49704 106 12260 NA

Change 3842 -19 -391 NA

Pivot 6449 6593 207 60.48

Resistance 6711 6836 211 61.95

Support 6260 6451 201 59.63

Ram Pitre (Sr.VP & Head Research)

Prathamesh Mallya

prathameshmallya@rathi.com

Analyst (Energy)

Please refer to the Disclaimer on the last page Page 2

Energy Weekly PERSPECTIVE

Host of positive economic data brightens prospects

for crude demand

In July the U.S. manufacturing index rose to 55.4,

from 50.9 in June. U.S. jobless claims slid 19,000 last

week to 326,000, the lowest in more than five years.

New orders in the ISM survey touched their highest in

two years and a drop in inventories suggested further

strength in order books was on the cards. The number

of Americans filing fresh claims for unemployment

benefits fell to a five-and-a half-year low last week.

Total nonfarm payrolls increased by 162,000 in July,

and the unemployment rate inched down to 7.4%. Out-

put at British factories also surged last month, accord-

ing to business surveys released on Thursday. Last

month China’s manufacturing index increased to 50.3,

from 50.1 the previous month.

Besides the economic data, even the fundamentals of

demand and supply have been good in recent weeks.

During the week ending July 26, U.S. commercial

crude oil stocks rose by 431,000 barrels, counter to

analysts' expectations. At 364.6 million barrels for the

week ended July 26, commercial crude oil stocks were

just more than 5% above the five-year average. This is

the first increase in crude oil stocks after having fallen

by nearly 30 million barrels during the previous four

reporting periods. Stocks at the Cushing storage hub,

delivery point for the NYMEX crude oil futures con-

tract fell by 1.9 million barrels to 42.1 million barrels.

The fall in inventories was for the fourth consecutive

week. Crude oil stocks at Cushing have dropped by

7.5 million barrels, or 15%, since the week ending

June 28.

Host of positive economic

data brightens prospects for

crude demand

-1.62%

1.66%

2.14%

-6.06%

-0.29%

-0.02%

0.31%

-7.00% -6.00% -5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00%

Spot Gold

ICE - Brent

WTI Crude Fut

Nat Gas

Gasoline

EURO

Dollar Index

Weekly Comparitive Performance

Please refer to the Disclaimer on the last page Page 3

Energy Weekly

Monetary stimulus to continue

U.S. consumer confidence pulled back in July as consumers were less optimistic about the outlook for the economy and the labour market. The index of consumer attitudes slipped to 80.3, from an up-wardly revised 82.1 in June. The report was shy of economists' expectations for the index to hold steady at June's original reading of 81.4. The ex-pectations index dropped from 91.1 to 84.7. Still, consumers were not so gloomy about their current standings, with the present situation index rising from 68.7 to 73.6, the highest since May 2008. Even though the recent data release from US has been good, the confidence indicators do not indi-cate a favourable sentiment.

On Wednesday last week, the U.S. Federal Reserve said that the world's largest economy was recover-ing but still needed support, dashing expectations that it would start winding down its own stimulus program as soon as September. After a two-day meeting, Federal Reserve policy-makers on Wednesday offered no indication they planned to reduce the U.S. central bank's monthly $85 billion in bond purchases at their next meeting in Septem-ber.

Natural Gas

Last week, cooler temperatures and a correspond-ing decrease in demand for air conditioning con-tributed to declining prices at most trading points. Consumption of natural gas for power generation (power burn) decreased 16.3% from the previous week. The Northeast and Southeast regions, two of the largest consuming regions for power burn, reg-istered week-on-week declines of 33% and 7.1% respectively. Temperatures in the Lower 48 states were 1.1 degrees warmer than the 30-year normal temperature and 1.4 degrees cooler than during the same period last year, and averaged 76.6 degrees for the week, compared to 78 degrees last year and the 30-year normal of 75.4 degrees.

On Friday, July 26, working natural gas in storage increased to 2,845 billion cubic feet. The 59-bcf gain in storage was greater than both the 28-bcf injection that occurred during the same week in 2012 and the five-year average increase of 47 bcf. Current inven-tories are 368 bcf (11.5%) less than last year at this time and 34 bcf (1.2%) below the five-year average of 2,879 bcf.

Even though we are seeing record supplies of crude oil and China's growth is modest at best, the crude-oil market has held up fairly well over the last few weeks. The factory data and steadily improving la-bour market conditions have suggested that the U.S economy got off to a good start in the third quarter. Also, US GDP grew at a 1.7% annual rate in the sec-ond quarter, up from a pedestrian 1.1% pace in the first three months of the year. In addition, we are at the peak of the driving season, which in the past has been bullish for crude demand and oil products. Also, U.S. refinery activity is high, which can ex-plain the continuing decline in crude stocks.

Even though we are seeing record supplies of crude oil and China's growth is modest at best, the crude-oil market has held up fairly well over the last few weeks. The factory data and steadily improving la-bour market conditions have suggested that the U.S economy got off to a good start in the third quarter. Also, US GDP grew at a 1.7% annual rate in the sec-ond quarter, up from a pedestrian 1.1% pace in the first three months of the year. In addition, we are at the peak of the driving season, which in the past has been bullish for crude demand and oil products. Also, U.S. refinery activity is high, which can ex-plain the continuing decline in crude stocks.

OUTLOOK

CRUDEOIL MCX DAILY CHART

Crude Oil MCX Aug, 2013 (CMP-6535)

Trend: Bullish as long as 6140 holds.

Crudeoil August closed at 6199, 3.63% down. Selling pressure was

seen during the week and we were expecting the same. This week

6140 hold to be crucial. As long as it sustain above the same we

may see some buying interest. In MCX support is seen at 6140-

6050-5940 and resistance at 6280-6360-6430. In NYMEX support

is seen at 104.30-102.90-101.00 and resistance at 105.40-106.60-

107.20.

Fresh View:

Trend: Bullish

After testing the exact trend line supports of 102.67 crude oil prices rebounded in late session of the week and settled at 109.94. As long as prices remain above 103.30 the bullish move is ex-pected to extend further towards 108.82 then 109.60-110 levels. So we recommend buying on dips for the week around the supports of 105.-104.50 levels. In MCX key supports are seen at 6460 then 6380 and resistance are 6630 then 6700.

Natural Gas MCX August 2013 (CMP-203.4)

Trend: Bearish

Natural gas (MCX) this week closed at 212..90, 5.02% down.

Downside is likely to continue for the week. Closing below 210 on

daily basis will confirm the downside trend. In MCX support is

seen at 205-198-191 and resistance is seen at 217-223-228. In NY-

MEX support is seen at 3.47-3.24 and resistance at 3.65-3.85.

Fresh View:

Trend: Bearish

Natural gas last week closed at 3.34 cents down by 6.06% As the

prices are settled below 0.3820 retracement level for the range

(1.90- 4.44). Downside is likely to continue further till the next

supports of 3.17 of 50% retracement level In MCX support is seen

at 205-198-191 and resistance is seen at 217-223-228. On MCX

supports are seen at 196 then 195 and resistance are seen at 208

then 214

NAT GAS MCX CHART

Technicals

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D I S C L A I M E R

Phone: 91-22-4047 7091 Fax: 91-22-4047 7070

E-mail: commodity@rathi.com

Shriram Pitre

Senior Vice President, Head - Commodity & Currency Research

Abhishek Chinchalkar

Research Analyst - Precious Metals

Harish Jujarey

Senior Technical Analyst

Nikunj Kumar

Associate Research Analyst

Pragnesh Jain

Senior Technical Analyst

Pinky Shah

Research Analyst, Currency

Rinkesh Jain

Associate Technical Analyst

Prathamesh Mallya

Research Analyst - Energy & Edible Oils

Siva

Senior Technical Analyst

Priyanka Jaiswal

Research Analyst-Agro