Commodities
Crude oil update
After three weeks of continuous advance, crude oil saw considerable red ink this week with the active August month future falling by $ 6.72 or 8.5% to $ 72.14/ barrel compared to a close of $78.86 last week.
Crude oil daily
Prices closed in red on 4 out of 5 days reacting to all the negative news from US and Europe. Lesser than expected personal income set the tone for the week. Later in the week, declining consumer confidence, ISG manufacturing index and construction spending further added to the bearishness. Moody’s action of keeping Spain’s rating on view kept the European concerns alive.
On supply side, a Reuter’s report cited that Russia’s oil production hit a record high in June and remained above 10 million barrels a day for the 10th month in a row. This as per the report, means that Russia remains the world’s top oil producer, ahead of Saudi Arabia.
Friday’s report about employment situation in US along with decreasing factory orders induced the prices to hold at the low level.
Only good news for the curde oil price was that US oil inventories declined by 2 million barrels but it had little impact on prices.
With no major data release from US next week, we expect crude to trade in a range for the next week. Prices will react to news of possible storm in Gulf region or Euro Area concerns.
Author:Praveen Bajaj
Crude oil price update
Chinese news of yuan free float (click here for MB update) had its affect on crude oil as well and NYMEX light sweet crude oil opened up and touched a high of $ 78.92/ barrel against last week’s close of $ 77.18. However it retreated back to $ 77.82 towards close as impact of the same was said to be limited.
Crude oil traded with a negative bias for the next three days under the effect of a surprise rise in US oil inventories. Inventories rose by 2 million barrels against an expected decline of 1 million barrels. This was taken as a sign of reducing demand from US. Negative hosuing data also weighed on the prices.
But Friday turned the table in favor of bulls. News that a tropical disturbance on the Carribean Sea can develop into a storm pushed the prices up by $ 2.35. As per a news report, the tropical storm has a 30% chance of developing into the storm and threatening production in the Gulf of Mexico region.
Price settled at $ 78.86/ barrel, up $ 1.68 from last week’s close and up $ 2.51 from last week’s low.
Storms in the Gulf harm crude oil production and consumers in anticipation of a price rise pre-pone their purchase which leads to an increase in prices even before the effect of storm is felt. Thus we expect prices to trade with a positive bias for the week. However, there will be volatilty in the prices and any news regarding storm will be very closely monitored by the traders.
Author:Praveen Bajaj
Weekly crude oil update:June 12, 2010
Carrying over from the negative sentiment created by weaker than expected US Employment report last week, crude oil started the week on a lower note, but then steadily increased for the week.
Prices rose on 4 out of 5 days of the week. Oil inventories at US declined 1.8 mln barrels this week compared to 0.9 mln barrels decline last week which indicated that demand at the largest crude oil consuming nation might be increasing. Again, speculation of a surge in Chinese exports data indicating a pick up in demand from the world’s fastest growing economy also boosted the sentiment. Crude prices rose to $75.48 on Thursday from $71.51 close of last week.
However, on Friday, prices corrected. Weaker than expected US retail sales data sparked speculations of a weaker recovery in US which led to a fall in crude prices to the extent of 2.25% to close the week at $75.48.
Though key numbers from US do not paint a good picture, but inventories are expected to decline due to high demand season. Also good numbers from developing economies are expected to keep the sentiments high. Thus we expect crude to trade with a positive bias for the next week.
Author:Praveen Bajaj
Sugar Decontrol
Sugar Free: Move to decontrol the sweetner comes amid differences
Our analyst Rahul Sonthalia updates our readers regularly on the sectoral updates. Here are his views on the recent updates in sugar sector.
- The move for sugar decontrol i.e removing levy quota has once again gained momentum because of dip in sugar prices aided by both improved domestic forecast and higher production in Brazil, the world’s biggest exporter
- Currently there are several restrictions imposed on sugar industry
- Mills are expected to surrender 10% of their production to the government at prices below the market rate. This is called levy system
- Levy sugar goes to meet the needs under the public distribution system
- The remaining 90% is sold by mills in a restricted marketing environment
- In present sugar control regime, the government decides the distance between two sugar mills and takes decisions with regard to sugar import and export
- If the system of imposing levy quota is removed, government may have to buy at the prevailing market price
- If prices rise, the government will then have to take on a subsidy burden, if it wishes to sell cheap
- There have been suggestions that to compensate for this additional cost on government, a tax in the form of ces can be imposed on the industry
- The sugar industry is divided into – Private sugar mills, under Indian Sugar Mills Association and co-operative sugar mills represented by the National Federation of Co-operative Sugar factories
- ISMA wants the government to announce the decontrol decision at the earliest as they think it would be very beneficial for the industry as mills will be in a position to release floating capital after sale of sugar
- On the other hand co- operative mills fear that decontrol will lead to crash in sugar prices
- Still there are many issues which need to be resolved before decontrol can be implemented
Author:Rahul Sonthalia, Research Head, Kredent
