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Reena Rohit Chief Manager Non-Agri Commodities and Currencies reena.rohit@angelbroking.com (022) 3935 8134
Anish Vyas Research Analyst Non-Agri Commodities and Currencies anish.vyas@angelbroking.com (022) 3935 8104
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5.4
Prices of Brent crude oil increased around 5.4 percent in July July13 and closed at $107.7/bbl, $107.7/bbl backed by supply concerns and threat of shutdown of the Suez Canal Canal, which supplied around 7 percent of all seaborne traded oil and about 13 percent of liquefied natural gas that is traded worldwide. While oil prices role due to threat of a disruption in oil supply through the Suez Canal, there was no actual impact seen. It is the importance nce of the Suez Canal that kept the markets fearing of a cutback in supplies.
Chart 2: Quarterly Performance of Crude Oil (%)
10.00 8.00 6.00 4.00 2.00 0.00 (2.00) (4.00) (6.00) (8.00) Nymex Crude Oil MCX Crude Oil Q1 2013 (%) Q2 2013 (%) (7.1) Brent Crude Oil (0.7) (1.0) 6.0 5.8 9.4
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Chart 2 shows that the currency factor played a crucial role in the Indian markets, with crude oil prices on the MCX rising 5.8 percent and 9.4 percent during Q12013 and Q2201 Q22013. Gains in the Indian markets have been phenomenal due to depreciation in the Rupee. Nymex oil prices rose during the Q12013, followed with losses of around 0.7 percent during the Q22013. The decline in prices seen during the Q22013 was on the back of weak k market sentiments on the back of global economic concerns. Chart 2 and 3 shows that Brent crude oil prices have seen major decline in prices during the Q22013 and since the start of the year. Factors that led to downside pressure in Brent crude prices du during ring these periods was the strong demand for light sweet crude oil and new pipeline capacity that helped carry oil from storage tanks in Cushing Oklahoma to the Gulf Coast.
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From $97/bbl at the start of the year, oil prices fell to $91/bbl when market sentiments weakened and then a sharp recovery has been seen on the back of threat of supply disruptions coupled with geopolitical tensions. Along with these factors, the decline in in inventories ventories from the month of May13 onwards kept adding further support to oil prices. In the month of April13, oil inventories stood around 395.3 million barrels and from there on inventories slumped to 364.6 million barrels in July13 due to increase in oil refining capacity in the US. On the domestic front, since ince the month of May13, gains in prices on the MCX have been higher than that on the Nymex due to the weaker Rupee. For the shortterm, this factor will continue to support crude oil prices on the MCX.
Positive trend in oil prices was supported due to a sharp decline in US crude oil inventories since the month of June13. In the month of July13 alone, oil inventories slumped 5 percent and this factor supported s prices strongly. Over the year, inventories have gained around 1.3 percent and they currently stand around 364.6 million barrels. During the Q12013 inventories increased around 8 percent, while in the Q22013 inventories slipped more than 1 percent. percent Capacity at US refineries has increased significantly in 2013 and this is leading to a drawdown in oil inventories.
Major increase in capacity was seen due to Motiva Enterprises expansion of its Port Arthur, Texas refinery along with the re-start of the he Trainer, Pennsylvania, re refinery, finery, which is owned by Monroe Energy, a subsidiary of Delta Airlines. The Port Arthur refinery has a huge capacity of 600,250 million barrels per day and is currently the largest refinery in the US. Data by the Oil and Gas Journal indicates that it is one of the ten largest refineries worldwide by crude distillation capacity. Refineries in the US are running at their highest levels in six years and are expanding their export terminals. This factor has booted the US energy sector as oil production has touched a 22-year 22 high.
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