Outlook on Crude Oil: Kotak Commodity

Kotak Commodity has come out with its report on Crude Oil.

Outlook on Crude Oil:

• NYMEX crude falls more than $1 Monday amid choppiness in equity markets and stronger US dollar
• NYMEX crude rose 0.8% last week marking its fourth weekly gain
• Crude oil rose last week amid strength in US equity markets and weakness in US dollar
• US DJIA index rose 4.7% last week marking its first gain in three weeks
• The US dollar index fell 0.9% last week marking its first decline in three weeks
• The Indian rupee fell as low as 48 against the US dollar last week, lowest level since Sept 2009
• EIA noted a 6.704 mn bbl decline in US crude oil stocks as against forecast of 3.1 mn bbl drop
• Italy has asked China to make significant purchases of Italian debt, says Financial Times report
• ECB and other central banks will coordinate to boost liquidity for European banks
• EU cuts Euro-zone GDP growth forecast to 0.2% in Q3 and 0.1% in Q4 as against previous forecast of 0.4% increase
• Moody's downgraded two French banks Societe Generale and Credit Agricole
• IEA and OPEC both trimmed their global oil demand growth estimate for 2012
• RBI warns that risks to Indian GDP growth projection are on the downside
• ICE Brent crude Nov contract ended at premium of $24.04/bbl Friday against $23.52 a week ago
• The number of rigs drilling for oil in the U.S. rose by 5 to 1062 rigs, as per Baker Hughes report.

OUTLOOK: Crude oil trades weaker weighed down by choppiness in equity markets and strength in the US dollar. Equity markets are choppy amid uncertainty about Euro-zone economies however we do not expect a major sell-off. EU member's stance to support debt ridden nations and expectations that Fed will take steps to support the economy will support crude oil prices. Focus this week will be on FOMC meet. The central bank is likely to discuss a number of measures however higher consumer prices and lack of success of QE2 will keep Fed from taking aggressive measures. A disappointing outcome of Fed meet could dent market sentiment leading to some weakness in equity markets. Overall, selling on rise could be the strategy for crude oil for this week. Apart from FOMC meet, focus will be on talks about Greece loan tranche talks, US economic data and situation in the Middle-east.

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To read the full report click on the attachment