Technical Recommendation:-Buy Exchange S3 S2 S1 R1 R2 R3 Mar- Crude oil - Nymex ($/bbl) 83.7 85.4 87.5 91.4 93.1 95.3 MCX Crude oil Feb (Rs/bbl) Nymex crude oil (April) 3853 392 3996 4139 426 4282 Buy at 88.5-89.25 TP 92.5 then 95 SL 86.5. MCX Crude oil (March) Buy at 42-4 TP 413 then 4175 SL 398 Last week s Price Movement Exchange Contract Open High Low Last % Change Volume % Change Open Interest % Change NYMEX WTI April 89.1 9.96 87.9 89.71.65% 1364 24.12% 27626 13% Crude ($/bbl) May 92.35 93.83 9.27 92.31 -.4% 655683 8.8% 179133 1% ICE Brent April 11.13 14.52 1.73 12.52 1.57% 1535-2.56% 211173-1% Crude ($/bbl) May 11.5 14.7 11.9 12.86 1.54% 445685 9.23% 139773 2% MCX WTI March 493 413 3987 473 -.44% 178745 114.4% 13957 22% Crude April 4263 432 4144 426-1.2% 7671 187.2% 189. 73% Review: As per our last week s report, a bearish trend was witnessed in crude oil price movement. Oil prices traded on a bearish trend initially, however managed to gain some points on weekly basis. February contracts made a low of Rs.3821/bbl and settled with a gain of.28% in MCX platform. However, March contract closed at Rs.473, by loosing more than.4% on weekly basis. WTI and Brent crude spread climbed to the record high at $16 in the last week. Geopolitical issues supported Brent prices to trade in a higher trend more than WTI future prices. Oil futures took negative cues from the economic releases from the major oil consumers in the last week. GDP of Japan declined by more than 1% in the fourth quarter. However, industrial production increased. Trade balance of China declined, contributed by lower import and higher export. Inflationary number of China, in the form of Producer price index and Consumer Price Index also increased. Thus, declining demand and increasing inflationary number made oil prices to take negative cues. Euro-zone and German GDP numbers increased, but in a lower pace. However, data releases from the US were mostly positive, which supported oil prices to recover from its weekly low. Increasing manufacturing activities in the US, made leading index, Empire manufacturing and Philadelphia index to climb up the most. Due to increasing business inventory, slight fall in Industrial production activities and housing sector is witnessed. US jobless data was slightly negative, as continuing claims increased in the last three weeks. Combined with above factors, oil prices took cues from clashes which have spread over Iran,
Libya, Bahrain etc Middle East countries from Egypt. Thus, any geopolitical issues in Middle East countries which include six oil producing countries of OPEC will change oil price movement. Thus, crude oil futures traded higher before the weekend, supported by better inventory report released in the last week. A volatile movement in Dollar was witnessed, and it closed at 77.61 levels by loosing 1% on weekly basis. As per US energy department, crude oil inventory has been increased by more than 8K barrels in the last week, which was very much lower than expectation. Though crude oil inventory is piling up continuously since January, total crude oil inventory increased in a lower pace in the last week. Similarly, Gasoline stocks also climbed up, though in a lower pace. However, Distillates inventory declined the most in the last week, currently at two month s lower level. Refinery utilization has declined by more than 3% as per the last week inventory report. As per CFTC, both long and short positions have been increased, however long positions have increased slightly higher making short covering sentiments in the market. As per PVO analysis, prices have increased slightly, whereas both open interest and Volume have declined due to existing bearish sentiment in the market. Derivative Analysis of Crude Oil Future Contracts 25 2 15 MCX Crude Oil Derivative Analysis 428 423 418 413 7 6 5 4 NYMEX Crude Oil Derivative Analysis 94 92 9 88 1 48 3 86 5 43 398 393 2 1 84 82 8 Open Interest Volume Price Open Interest Volume Price US Crude Oil Inventory DOE Warehouse Stocks (' barrels) Commodity Latest week Previous week Change Crude Oil 345917 34557 86 Gasoline 24196 24891 25 Distillate 16127 164366-396 Refinery utilization (%) 81.2 84.7-3.5 EIA Working gas storage (Bcf) Natural gas 1911 2144-233
$/BBL Rs/BBL Energy Weekly Outlook We may expect oil futures to recover from its bearish movement in the coming week, supported by expected better global economy. Prevailing clashes in Middle East countries may again light up supply concern from the oil producing countries, which may support oil prices to take positive cues. On the other hand, Portugal may seek bailout from European Union and International Monetary Fund. G2 meeting may come out with better result for the world economy. Thus, a bullish trend may witness in the coming week. Economic releases from the US in the form of GDP of fourth quarter are expected to increase. Consumer confidence is expected to increase in February. As manufacturing activities are in increasing order it may support durable good orders to increase the most. Continuing claims for jobs is likely to decline. However, housing sector is expected to remain on lower side. There are major economic releases from China. Euro-zone industrial orders are likely to come in negative numbers, which may have negative impact on oil price movement. German and UK GDP numbers are expected to remain unchanged for the fourth quarter. Overall oil price trend is expected to recover from last week s movement. However, inventory data releases must be eye on Wednesday, which is expected to come bullish for oil prices, supported by declining refinery utilization figure. Facts to watch out: API Inventory data releases on Wednesday 2: A.M. IST DOE Inventory data releases on Wednesday 9: P.M.IST Calendar spread 4 3 NYMEX - Crude oil (Apr-May) 2 15 MCX-Crude Oil(Mar-Apr) 2 1 1 5-5 Calendar spread between the consecutive contracts stands at Rs.153 after making a high of Rs.2 on last Monday. However, spread differences started declining afterwards, as more volume was witnessed in February contract in comparison to March contract. In the coming week, we are expecting spread to increase slightly more movement can be seen in April contract than March. Technical analysis: CRUDE Oil NYMEX: April crude oil futures prices traded lower for the first half of the week and recovered all the losses at the end and closed in green. It made a low of $87.9 then high of $9.96 levels and settled higher at $89.71 levels. It was up by.65% on last week. Closing of the weekly candle
renders upside movements for the coming week. Prices are moving up after witnessing the crucial Trend Line support at $87.8 levels. On sustained trade above is likely to remain higher. Prices are witnessing Trend Channel formation on the higher side allowing the prices to trade in a range bound. The principle of Fibonacci Retracement states that crude oil is witnessing crucial support of $86.8 levels which is 38.2% retracement of the range $73.52-94.89 levels. On sustained trade above is likely to remain higher and has potential for the prices to test $94.89 levels which is the origin point. Incase market breaches the support of $86.8 levels we may expect to see limited gains. The Moving Average principle suggesting upside movements as prices are trading on the higher side after witnessing key support of 34 week EMA. The momentum indicator weekly RSI-14 is treading at.539 levels and showing higher potential. However a mild correction on the lower side is expected before resuming its up trend. The Volume indicator analysis also suggesting uptrend as volumes has increased from 1.9M to 1.36M contracts. It means volumes have increased on upside movement. Hence, we expect prices to trade higher and recommend buying at support levels for the coming week.
Natural Gas Technical Recommendation: - Sell Exchange S3 S2 S1 R1 R2 R3 NYMEX Natural Gas ($/MMBtu) 3.6 3.8 3.8 4. 4.1 4.2 MCX Natural Gas (Rs./MMBtu) 163 17 173 183 19 194 NYMEX Natural Gas(April) MCX Natural Gas(March) Sell in the range $3.95-4. TP $3.75 then $3.55 with stop loss above 4.175 Sell in the range Rs. 175-177 targeting Rs. 166 with strict stop loss above Rs. 183 Last week s Price Movement Exchange Contract Open High Low Last % Change Volume % Change Open Interest % Change NYMEX April 3.98 4.5 3.87 3.91-1.79 42493-23.969 198359 28.3 ($/MMBtu) May 4.3 4.12 3.93 3.98-1.88 156863-62.92 2651 6.95 MCX March 183 186 176 177-2.91 29489 25.9 762 44.74 (Rs/MMBtu) April 23 24 187 188-3.35 5.67 37.73 Review Like crude oil, natural gas future prices also fell in the last week, consecutively for the fourth week. February contract traded below Rs.173/ MMBTU and closed at Rs.174.5 by loosing more than 2% in MCX platform. Similarly March contract have declined near 3% and settled at Rs.177 /MMBTU in MCX. However, NYMEX traded gas futures have fallen less than MCX prices in the last week. Natural gas future prices traded on a bearish trend despite of bullish storage report released in the last week. US weather condition was not so effective to drive gas prices and prices started falling from beginning of the week. As per EIA, natural gas storage level declined by 233 BCF, in the last week, slightly less than market expectation. However, the bearish sentiments in the market made gas prices to fall. As Baker Hughes Rig counts, natural gas rig counts declined to 95 numbers fell by 1. As per PVO, volume have been declined more with prices, whereas open interest have been increased in February contract. Similarly, as per CFTC short positions have been increased in the last week. Thus, increasing bearish sentiment made gas prices to trade on lower trend.
$/MMBtu Rs /MMBtu Energy Weekly Derivative Analysis of Natural Gas Future Contracts 7 6 5 4 3 2 1 MCX Natural Gas Derivative Analysis 23 22 21 2 19 18 17 3 25 2 15 1 5 NYMEX Natural Gas Derivative Analysis 5 4.5 4 3.5 16 3 Outloo Open Interest Volume Price Open Interest Volume Price Outlook: In the coming week, we are expecting Gas prices to trade on lower trend; however some improvement can be seen supported by better economic releases from the US. As per US commodity weather group, weather condition of the US is expected to remain mild for couple of weeks, which may lower demand for gas prices. However, actual storage report may change price movement. Calendar spread.8.6.4 NYMEX - Natural gas (Apr-May) -2 MCX Natural gas (Mar-Apr).2-4 -6-8 Calendar spread declined to Rs.3.1 in MCX for February and March contracts. Current month contract decline less than far month contract, which made spread to decline. Similarly, spreads difference declined in NYMEX future contracts. However, we may expect the spread to increase in the coming week, as March month contract may trade in a lower trend in comparison to April month contract.
Technical analysis: NYMEX Natural gas Natural gas future prices traded lower on last week by continuing the previous trend. It made a high of $4.51 levels then low of $3.867. It was down by 1.79% on last week. Closing of the weekly candle renders downside movements for the coming week. Prices are witnessing immediate and crucial support at 3.848 levels (previous swing lows). Only on breach and sustained trade below would lead the prices to further downside. The principle of Fibonacci Projections states that Natural gas is witnessing crucial support at 3.787 levels which is 61.8% projections of the range (5.393-3.848-4.8) levels. On breach and sustained trade below has potential for the prices to test 3.55 levels which is 76.4% projections of the above mentioned range. Incase if markets fails to sustain below support levels of 3.787 levels downside movements would be limited. The Moving Average principle suggesting downside movements as prices are trading well below the short and medium term EMA s of (8, 21 & 34). The momentum indicator RSI weekly 14 is treading at.375 levels suggesting downside movements to be continued for the coming week. We expect price to trade lower and recommend selling at higher levels.
Crude Oil Natural Gas Ratio This week ratio between crude oil and Natural gas stands at 22, which is same as last week s ratio. Natural gas price have fallen the most in comparison to crude oil prices, which made ratio to increase. However, volatile movement in crude oil prices could not support ratio to climb more. In the coming week, we are expecting increase in ratio. 23 22 21 2 19 18 17 16 Crude Oil- Natural Gas Ratio MAJOR ECONOMIC RELEASES IN THE COMING WEEK Date Time Region Event Period Survey Prior 2/21/211 14: GE PMI Manufacturing FEB A 6.4 6.5 2/21/211 14:3 EC PMI Manufacturing FEB A 57.2 57.3 2/21/211 14:3 EC PMI Services FEB A 55.8 55.9 2/22/211 2:3 US Consumer Confidence FEB 63.5 6.6 2/22/211 2:3 US Richmond Fed Manufact. Index FEB 17 18 2/23/211 15:3 EC Industrial New Orders SA (MoM) DEC -1.% 2.1% 2/23/211 17:3 US MBA Mortgage Applications 18-Feb - - -9.5% 2/23/211 2:3 US Existing Home Sales JAN 5.21M 5.28M 2/23/211 2:3 US Existing Home Sales MoM JAN -1.3% 12.3% 2/24/211 12:3 GE Domestic Demand 4Q F - -.4% 2/24/211 12:3 GE Capital Investment 4Q F 1.8% 1.3%
2/24/211 12:3 GE Government Spending 4Q F.2% 1.1% 2/24/211 12:3 GE Private Consumption 4Q F.2%.4% 2/24/211 12:3 GE GDP s.a. (QOQ) 4Q F.4%.4% 2/24/211 15:3 EC Euro-Zone Consumer Confidence FEB F -9.9-11.2 2/24/211 15:3 EC Euro-Zone Economic Confidence FEB 16.8 16.5 2/24/211 15:3 EC Euro-Zone Indust. Confidence FEB 6.5 6 2/24/211 15:3 EC Euro-zone Services Confidence FEB 9.5 9.2 2/24/211 19: US Chicago Fed Nat Activity Index JAN - -.3 2/24/211 19: US Initial Jobless Claims 19-Feb 43K 41K 2/24/211 19: US Continuing Claims 12-Feb - - 3911K 2/24/211 19: US Durable Goods Orders JAN 3.% -2.5% 2/24/211 2:3 US New Home Sales JAN 33K 329K 2/24/211 2:3 US New Home Sales M/M JAN -8.1% 17.5% 2/24/211 2:3 US House Price Purchase Index Q/Q 4Q - - -1.6% 2/24/211 2:3 US House Price Index M/M DEC -.2%.% 2/25/211 15: UK GDP (Q/Q) 4Q P -.5% -.5% 2/25/211 19: US GDP Price Index 4Q S.3%.3% 2/25/211 19: US Personal Consumption 4Q S 4.2% 4.4% 2/25/211 2:25 US U. of Michigan Confidence FEB F 75.4 75.1 2/25/211 GE Consumer Price Index (M/M) FEB P - - -.4% 2/25/211 GE Consumer Price Index (Y/Y) FEB P - - 2.% Prepared By: Aurobinda Prasad G: Aurobinda@karvy.com Smitarani Tripathy: Smitarani.tripathy@karvy.com
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