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Weekly Commodity Research Reports

Energy Weekly from 28th January- 02nd February 2013

Crude Oil

Crude oil has eased back ahead after moving closer to $97/bbl last week. We expect price to remain under pressure in the near term amid some profit taking after recent rally. Crude market remains well supplied while demand outlook remains uncertain. The US fiscal deal has averted concerns about its economic impact however US debt level remains a cause of concern and market confidence will remain shaky. Mixed US economic data, higher US production and reports of lower supply from Seaway pipeline will also weigh on WTI crude price. The euro is also expected to correct from recent highs as uncertainty persists about regional economies. Focus this week will be on US economic data especially GDP estimate, non-farm payrolls and ISM manufacturing and FOMC meet. On euro-front, focus will be on economic data and regional bond auction. Also in focus will be weekly inventory report. Also in focus will be development in the Middle-east especially Syria, Iran and Israel. Overall, crude looks likely to trade in a range of $94-97.5/bbl.

On domestic front, we expect crude price to correct in line with international market however movement in Indian rupee will affect price as well. Rupee movement will be affected by RBI meet later this week and trend in equity market. Support is seen at Rs.5085/bbl level while upside seems limited near Rs.5235/bbl level.

Natural Gas

Natural gas has corrected after failing to sustain above the $3.65/mmBtu level and amid mixed weather forecasts. We could see additional volatility in the near term due to expiry related trade. However we expect price to remain under pressure amid demand uncertainty and higher supply in US market and continuing weakness in coal price. Overall, we expect to see some correction in natural gas this week. While weather will continue to be key price determining factor for natural gas, sharp market movement in crude oil price could also affect gas price. Also in focus will be movement in US coal price and US environmental policies. We expect gas to trade in a range of $3.35-3.75/mmBtu.

On domestic front, we may see some correction this week in line with trend on international market. However sharp movement in Indian rupee will also affect domestic gas price. Gas is expected to trade in a range of Rs.175-195/mmBtu.

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