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1 04 January 2010 Market Commentary Oil finishes the year climbing whooping 78% Crude prices traded in a very small range of $2 during the previous week on the back of year end holidays. But continuing with last week s bullish momentum crude prices in a positive trajectory near year's high. Prices which had catapulted to $78 last week tested previous highs of $80 during the week. Overall activity on international exchanges was lack luster due to year end holidays. Initially positive momentum was on the back of geopolitical tension (.i.e.) militants attacking the shell pipeline in Nigeria Delta region, problem in Iran and Russia - Ukraine gas row. Besides geopolitical news prices were influenced by harsh colder conditions in U.S., dollar index movement, Equity markets trading high, U.S. Consumer Confidence, Weekly Energy Inventory data from U.S., OPEC - seaborne export numbers and compliance rate, finally Chinese news of rising imports from Kuwait. PERSPECTIVE Week started on a steady note with positive biasness on the back of tension in Nigeria delta and problem in Iran. This helped crude prices opened on a positive note. Nigerian militants carried out their first attack on an oil pipeline since the government offered them amnesty in October ahead of peace talks, which have faced delays. And the political upheaval in Iran had impact on oil prices, after at least 10 leading opposition figures were arrested, a day after eight people were killed in anti-government protests. Even Russia has scrapped January oil exports via Ukrainian ports and also said it fears Ukraine will have problems pay- ENERGY - Weekly Market Data Exchange Spot ICE-Brent Contract Cushing - USA NYMEX - WTI NYMEX - NAT GAS Feb Feb Feb Open High Low Close Change Percent Chg 2.86% 2.12% 1.68% -2.21% Volume NA Open Interest NA Change NA Pivot Resistance Support Exchange DOMESTIC - Weekly Market Data MCX NCDEX MCX Crude Brent Nat Gas INR/USD Contract Jan Jan Jan SPOT Open High Low Close Change Percent Chg 2.59% 2.59% -2.57% -0.06% Volume NA Open Interest NA Change NA Pivot Resistance Support

2 Energy Weekly ing for its gas, a sign of a possible repeat of New Year gas rows which have in the past led to supply cuts in Europe. Consumer confidence ticked up from 50.6 last month to 52.9, in line with market expectation. Weekly Crude Oil Stocks Besides that heavy snow and freezing temperatures in the U.S. Northeast helped support prices. However, prices sort of halted during mid week as U.S. dollar firmed to a six week high against the Japanese yen and stayed near a three-month high against the euro, as investors bet the U.S. economy may recover faster than other regions from recession, boosting prospects for U.S. interest rate hikes in Furthermore, weakness in euro as Greece is facing a fiscal crisis that puts the country's credit-worthiness at risk and has shaken investor confidence in euro zone economies. Supporting the dollar was U.S. Consumer confidence. Which picked up in December as lower levels of unemployment lifted hopes. The Conference Board's index of consumer confidence ticked up from 50.6 last month to 52.9, in line with market expectation. Consumer confidence is closely watched because consumer spending makes up about 70% of economic activity in the US. Pent-up demand and deep discounts have fuelled spending during the holiday shopping season, and it is projected consumer spending to rise by 2% in the fourth quarter. Weekly Distillate Stocks On the back which Wall Street closed at 2009 high's and in turn crude prices took positive cues from the same and closed in positive trajectory. Demand Supply China To raise imports from Kuwait,,, China has agreed to raise 2010 crude imports from Kuwait by 50% to about 240,000 barrels per day, with Chinese refiners set to process at record rates as demand rebounds strongly. The jump, which follows a one-third increase this year, comes after Iraq said it would more than double exports to the world's second-largest oil consumer and Saudi Arabia agreed to a 12 percent increase for The increases from Iraq and Kuwait, both of which supply mostly heavy, high-sulphur oil, are partly due to top exporter Saudi Aramco cutting back on similar grades Chinese oil refiners consider more economic to process. But more importantly, it's the expected demand increase from China that has led to the supply growth. Sinopec Corp, Page 2 Please refer to the Disclaimer on the last page

3 Asia's top refiner, has said it will raise crude throughput next year to 4.1 million bpd, 14% above the rates recorded in the first three quarters of this year. OPEC Seaborne Exports To dip in Jan,,, OPEC seaborne oil exports, excluding Angola and Ecuador, will fall by 40,000 barrels per day (bpd) in the four weeks to Jan. 9. Exports from the group will drop to million bpd on average from million bpd in the four weeks to Dec. 12, UK consultancy Oil Movements said. OPEC Compliance At 58% from 60%,,, OPEC oil supply rose in December to a 2009 high led by Nigeria and smaller rises elsewhere in the group, further eroding compliance with agreed output targets. Supply from the 11 members of the OPEC with output targets, all except Iraq, rose to million barrels per day (bpd) from a revised million bpd in November. The survey implies OPEC has made 58% of promised supply cutbacks, down from 60% in November. OPEC kept its official output limits unchanged at a meeting on Dec. 22 in Angola and called for more compliance. A year ago, it agreed to cut supply by 4.2 million bpd in response to lower demand and prices. Supply from the OPEC -11 was 1.78 million bpd higher in December than their target of million bpd, the survey found, meaning the group lowered output by 2.42 million bpd of the promised curbs. That gave the 58% compliance rate, which brings the group's level of adherence with its output limits below its historical average of 60% and far short of its peak of 81% in April and March this year. Russia oil exports to stalled Russia has scrapped January oil exports via Ukrainian ports and also said it fears Ukraine will have problems paying for its gas, a sign of a possible repeat of New Year gas rows which have led to supply cuts in Europe. Europe, which receives 25% of gas from Russia, was left short of supplies in January 2006 and 2009 because of pricing rows between Moscow and Kiev. Another key transit state, Belarus, cut Russian oil flows to Europe in January 2007, also due to a pricing row, which further undermined the image of Russia, the world's largest oil and gas producer, as a reliable energy supplier. Ukraine has been regularly paying its gas bills this year, but the December bill, due before Jan 11, was expected to soar to $1 billion from $770 million in November due to low temperatures. However, despite the expected rise in cold weather demand, Russian gas export monopoly Gazprom said that Ukraine had cut gas purchases in recent days. U.S. Inventories Continuous drawdown,,, U.S. crude oil stocks fell last week on a rise in refinery runs while distillates inventories dropped due to cold weather across the nation. Meanwhile, U.S. gasoline stocks logged a surprise decline. Stockpiles of crude oil fell by 1.5 million barrels to 326 million barrels in the week to Dec. 25, lagging forecasts of a 2 million barrel inventory decline. Refiners' demand for crude -- known as "crude runs" -- moved up by 102,000 barrels per day (bpd) to million bpd, as refinery utilization rates rose 0.3% point to 80.3% of capacity, in line with forecasts. Stocks of distillates, which include heating oil and diesel, fell 2 million barrels to million, near forecasts of a decline of 2.2 million barrels. Heating oil stocks shed 1.9 million barrels to 44.4 million last week, as temperatures dropped in much of the nation, including the U.S. Northeast, the world's largest market for the heating fuel. As a result previous week got a mix set of cues from fundamentals mentioned above. But due to lower participation we have seen pricing maintaining its uptrend and touching previous high s of $80 levels. Natural Gas U.S. natural gas futures slid about 2% nearing weekend, pressured by a smaller-than-expected drawdown from winter inventories despite strong cash gas and cold, wintry weather in the eastern half of the nation. Front month February futures on the NYMEX slid 13.7 cents, or 2.4%, to settle at $5.572 per million British thermal units, after trading in electronic trade between $5.505 and $ Gas futures ended the year down 1% from the $5.622 settlement on Dec. 31, 2008, according to Reuters data. The front-month slid to a 7-1/2-year low of $2.409 in September and averaged $4.17 in 2009, down 53% from a 2008 average of $8.90. The NYMEX 12-month Henry Hub strip lost 12.3 cents to finish at $ On the storage front,

4 traders agreed Thursday's 124-billion-cubic-feet storage draw was bearish, noting it was well below Reuters poll estimates for a 150 bcf drawdown and the year-ago drop of 144 bcf. But they also noted it was above the five-year average drop of 120 bcf. Thursday's U.S. Energy Information Administration report showed total domestic gas inventories fell to trillion cubic feet after hitting an all-time high of tcf during the week ended Nov. 27. But total U.S. gas storage is still at record highs for this time of year, standing 379 bcf, or 13%, above last year and 391 bcf, or nearly 14%, above the five-year average. Just over 560 bcf was pulled from storage this month due to colder-than-normal weather, versus a more normal draw of about 500 bcf. In the cash market, gas for delivery through Monday at Henry Hub, the NYMEX delivery point in Louisiana, rose 4 cents on average to $5.82, with late deals firming to 16 cents over the front month contract, from about a 6- cent premium late Wednesday. Gas on the Transco pipeline at the New York city gate, jumped more than $1.25 on average amid the cold outlook to $8.14, while Chicago gas was 12 cents higher on the day at $6.15. Temperatures in both key gas consuming cities were seen mostly below normal for the next six days, with highs mostly in the 20s or 30s Fahrenheit in New York and the teens F in Chicago, while lows slip into the single digits in Chicago, according to forecaster DTN Meteorlogix. The latest National Weather Service six to 10-day outlook issued Wednesday called for below-normal readings for about the eastern half of the nation and near-normal readings or above-normal readings in the West. OUTLOOK After continuous upsurge during last couple of weeks for the coming week we don t expect much of the activity in oil market as international markets would report a thin trade. But we continue to hold our positive biasness. As colder winter in U.S. would provide the much needed support to the prices besides that tension in Nigeria delta region has been firming up due to delay in payment to the militants. Furthermore, Russia stopping it supplies to Ukraine and China running out of gas would also provide some positive impetuous to prices. But profit booking cannot be ignored and for the coming week we could see some profit booking getting in place. On price front we expect Nymex Feb contract to head towards $75 levels if we see some profit booking. However, if prices don t see any profit booking and trades above $80 than we could see it heading towards $84 levels. Prices would take cues from the U.S. manufacturing data later on Monday to gauge the strength of the economy, while monthly employment figures in the first week of the new year will keep investors focused on what is likely to be 2010's reality -- the economy's struggle to recover. On the data front, the main event will be Friday's report from the Labor Department on U.S. non-farm payrolls in December. Economists polled by Reuters have forecast that payrolls shed 20,000 jobs in the final month of 2009, compared with just 11,000 lost in November. Above $80 prices to head towards $84, whereas if correction gets in [place than $75 can be seen

5 TECHNICAL ANALYSIS Crude oil (MCX JAN) Trend: Sideways to Mildly Bullish Crude Oil Crude Oil remained in sideways making a high of only but still remains in rising channel. Crude oil shall be sideways to mildly bullish in the coming week Immediate support is seen near 3600 and below that can see 3525 a break below same can see prices drifting towards 3350 levels. All technical indicators are Sideways turning up and in over bought condition indicate prices to can correct a bit to adjust the overbought condition before rallying up in the next coming sessions. NYMEX Crude oil February Contract (Weekly) Supports $ 78, $75 and $72 : Resistances $82.25, $88 and even $91 MCX Crude oil January Contract (Weekly) Supports 3600, 3525 and 3350 levels : Resistances 3750, 3850 and even 4050 levels Strategy : Buy Crude MCX January in the range of 3760, Stop loss below 3700, Target 3850/3900 Natural Gas (MCX JAN) Natural Gas Trend: Sideways Natural gas remained in sideways making a new high and drifted down on profit taking in the last week. Coming to this week Trend will be sideways between 255 and 264 levels. All technical indicators are in turning down indicating prices to drift down in next coming sessions. NYMEX Natural gas February Contract (Weekly) Supports $5.55 and $5.15 and even $4.65 levels : R e s i s t a n c e s $6.00, $6.25 and even $6.70levels MCX Natural gas January Contract (Weekly) Supports 255, 2463 and even 238levels : Resistances 265,246 and even 238 levels Strategy : Buy Natural gas MCX January in the range of , Stop loss below 253, Target 265/ 275

6 Energy Weekly Weekly Comparitive Performance -0.74% Spot Gold ICE - Brent 2.12% WTI Crude Fut 1.68% -2.21% Nat Gas Gasoline 2.10% -0.60% EURO Dollar Index 0.16% CRB Index 1.18% -2.50% -2.00% -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% Please refer to the Disclaimer on the last page Page 6

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