FOR PRIVATE CIRCULATION ONLY 8 May 2018 MARKET ANALYSIS MARKET OUTLOOK

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1 FOR PRIVATE CIRCULATION ONLY 8 May 2018 MARKET ANALYSIS NYMEX crude slipped more than 1% to trade slightly below $70 per barrel after a 1.4% rally yesterday. Crude oil surged as high as $70.84/bbl in intraday trade yesterday, the highest level since Nov Crude weakened today as market players position for Trump s announcement today on Iran s nuclear deal. The announcement is scheduled at 2300 IST today. The US had given European members until May 12 to alter the 2015 nuclear deal or it may unilaterally withdraw from the deal. Trump is now expected to release a statement today. A withdrawal would reintroduce sanctions on Iran, which could curb its crude exports. Exports averaged 2.12 million barrels per day in 2017, compared with just 1.13 million b/d in 2015, when the sanctions were still in place. The recent surge in crude oil price shows that market players have already factored in that Trump will withdraw. If Trump withdraws from the deal and reimpose sanctions on Iran it is positive for crude price but we may not see much impact as it is already factored in. However, if Trump shows some leniency and opens a way for negotiations there could be a sizeable correction in crude oil. While focus remains on Iran s nuclear, crude is also supported by OPEC s production cuts and concerns about Venezuelan supply. As per reports, ConocoPhillips moved to take Caribbean assets of Venezuela's state-run PDVSA. Venezuelan output has been falling for last few years to due lower investment. Tightening finances will further affect supply. As per Reuters survey, OPEC's production fell by 70,000 barrels per day in April to million bpd. Compliance with production cuts rose from 161% to 162%. Market players are expecting OPEC to extend the deal into 2019 however Iran has opposed the idea. China s crude imports rose from39.17 million tonnes in March to million in April showing robust demand. Crude has managed to gain despite gains in US dollar and record high US output. US crude production hit record high level of million barrels per day. The US dollar index has risen to Dec.2017 high on diverging monetary policies of Fed and other central banks. CRUDE OIL Futures Market Movement MCX Crude Oil (Rs/bbl) as on 7-May Contract High Low Close Change % Change May Jun Jul NYMEX WTI Crude Oil (USD/barrel) as on 7-May Jun Jul Aug ICE Brent Crude Oil (USD/barrel) Jul Aug NYMEX Heating Oil (USD cents/gallon) Jun Jul NYMEX Gasoline (USD cents /gallon) Jun Jul Spread (USD/barrel) Close Prev. % Change ICE Brent- NYMEX WTI NYMEX Crack Spread MARKET OUTLOOK MCX Crude may note some decline tracking cues from international exchange but downside is limited. NYMEX crude corrected over 1% to trade near $70 per barrel as market players position for US President Trump s announcement on Iran s nuclear deal. The deadline to decide on the deal was May 12 but Trump is expected to make an announcement today. Trump will decide whether they want to withdraw from the deal or not. Crude oil has already rallied in anticipation that Trump will withdraw and reimpose sanctions on Iran which will reduce Tehran s exports. If Trump withdraws it will be positive for crude oil but we may not see much reaction. However, if Trump shows some lenience and gives time to renegotiate terms it could result in a sizeable correction in crude oil. Amid other factors, crude is also supported by OPEC s support for production cuts and worsening outlook for Venezuelan crude supply as ConocoPhillips moved to take Caribbean assets of Venezuela's state-run PDVSA. Crude may remain choppy today ahead of the decision but threat of supply disruption will keep the bias on the upside. Last Close Support Resistance Trend Sideways Energy Daily Please See Disclaimer on the Last Page 1

2 TECHNICAL OUTLOOK MCX Crude Oil May 18 NYMEX WTI Crude Oil S2 S1 Pivot R1 R2 S2 S1 Pivot R1 R Strategy: Trading range , Sideways Energy Daily Please See Disclaimer on the Last Page 2

3 MARKET ANALYSIS NYMEX natural gas trades near $2.73/mmBtu after a 1.1% gain yesterday. Natural gas has gained some support from forecast of warm weather in US which will increase cooling demand. However, weighing on price is expectations of fast buildup in stocks with higher demand. Mixed factors may keep gas in a broad range but sell on rise is suggested as summer related demand will pick up slowly. The late season cold snap witnessed in April has come to an end and weather forecasts now indicate warm weather in some parts of US. We will now see a switch from winter related heating demand to summer related cooling demand. Summer demand will pick up slowly and will rise during peak season in June and July. According to US weather forecaster NOAA, warmer-thannormal temperatures expected across most of US from May US gas stocks are well below average levels due to large withdrawals during winter season. Stocks stand at 1343 Bcf which is 40.2% lower than stocks same period last year and 28.4% lower than 5-year average decline for the week. NATURAL GAS MCX Natural Gas (Rs/mmBtu) Contract High Low Close Change % Change May Jun Jul NYMEX Natural Gas (USD/mmBtu) Jun Jul Aug Spread/Ratio Close Prev. % Change WTI-Natgas Ratio MCX WTI-Natgas Ratio MARKET HIGHLIGHTS NYMEX natural gas trades near $2.73/mmBtu after a 1.1% gain yesterday Mixed factors may keep price rangebound However, we have now entered the injection season. Stocks rose by 62 Bcf for the week ended April 27 as against market expectations of 52 Bcf rise. The stock buildup will pick up pace in coming days. Higher production will result in big injections into storage in coming days. US gas production is near record high levels. As per Bloomberg data, lower 48 gas production rose to record 78 bcf/d on May 1. The number of rigs drilling for natural gas rose by 1 to 195 rigs, the highest level since Nov Rise in rig count shows higher production interest. MARKET OUTLOOK MCX Natural gas may note mixed trade in line with international market but sell on rise is suggested. NYMEX natural gas trades near $2.73/mmBtu after a 1.1% gain yesterday. Supporting gas price is forecast of hot weather in US which will increase cooling demand for gas. However, weighing on price is record high US production, rise in US natural gas rig count and expectations of further buildup in stocks. Mixed factors may keep gas in a range but selling could be considered at higher levels as cooling demand will pick up slowly. Last Close Support Resistance Trend Sideways Energy Daily Please See Disclaimer on the Last Page 3

4 Price Movement on NYMEX last week Commodity Close Change % High Low Crude Oil ($/bbl) Natural Gas ($/mmbtu) Gasoline (cents/gal) Heating Oil (cents/gal) U.S. CFTC Commitments of Traders (COT) Futures Only Report (01 May 2018) Non-commercial Position (contracts) Long Short Net position Change Change (%) Crude Oil 815, , Natural Gas 330, ,575-94, Gasoline 180,319 97,292 83, Heating Oil 125,387 98, U.S. EIA Weekly Petroleum Inventory Report (27 April 2018) (1000 barrels) Stocks Change % Expectation Demand Change% Imports Change% Crude Oil Gasoline Distillate Fuel Oil U.S. Weekly Natural Gas Storage Report Billion Cubic Feet (BCF) Week Stocks Change Change over last year Change over 5-year average Natural Gas 20 Apr % -29.1% Natural Gas 27 Apr % -28.4% US Economic Calendar (07 th May th May 2018) (Source: Briefing.com) Date IST Release For Actual Consensus Prior May JOLTS - Job Openings Mar NA 6.052M May PPI Apr 0.20% 0.30% May CPI Apr 0.30% -0.10% May Initial Claims 05-May 220K 211K May Mich Sentiment - Prelim May Energy Daily Please See Disclaimer on the Last Page 4

5 Aurobinda Gayan- Vice President Research Fundamental Team Faiyaz Hudani- DVP Oilseeds Complex Madhavi Mehta- AVP Bullion; Energy Priyanka Jhaveri- AVP Base Metals Technical Team Ashok Kamrani- Senior Manager Karan Shah- Manager Anup Sahu- Manager Disclaimer This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient and we are not soliciting any action based upon it. This report is not to be construed as an offer to seller or solicitation of an offer to buy any commodity or commodity derivative to any person in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Commodity Services Private Limited. It doesn t constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither Kotak Commodity Services Private Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the commodity referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions including those involving commodity derivatives involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a commodity s price movement and trading volume as opposed to focusing on a commodity s fundamentals and as such may not match with a report on a commodity's fundamentals. We do not have any information other than information available to general public. The report is based on information from sources like respective industry associations, FICCI, CII, companies, media and other public sources. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading may make trading decisions that are inconsistent with the recommendations expressed herein. We and our affiliates, officers, directors, and employees worldwide may: (a) from time to time, have long or short positions in, and buy or sell the commodities mentioned herein or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodity/ (ies) discussed herein or have other potential conflict of interest with respect to any recommendation and related information and opinions. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject commodity and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Kotak Commodity Services Private Limited s prior written consent. Registered Office: Kotak Commodity Services Private Ltd., Nirlon house, 1st Floor, Dr. Annie Besant Road, Opp. Sasmira, Near Old Passport Office, Worli, Mumbai CIN No. U65910MH1987PTC Fax: Customer care no Website: SEBI registration no.: INZ NCDEX/TCM/CORP/0479. MCX/TCM/CORP/0026. NCDEX MCX Trading in commodities is subject to market risk and one should read the Risk Disclosure Document carefully prior to trading Energy Daily Please See Disclaimer on the Last Page 5