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SMC Global Monthly Report on Energy
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SPECIAL MONTHLY REPORT ONSPECIAL MONTHLY REPORT ON
EnergyEnergy(October 2014)
1
EN
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GY
October 2014
ENERGY PERFORMANCE (29th August 2014 - 30th September 2014) (% change)
ENERGY PERFORMANCE(January 2014 - September 2014) (% change)
Source: Reuters & SMC
-2.69
-4.05
4.46
0.98
-6.00 -4.00 -2.00 0.00 2.00 4.00 6.00
MCX
NYMEX
Natural Gas Crude oil
-7.36
-6.69
-2.72
-2.60
-8.00 -7.00 -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00
MCX
NYMEX
Natural Gas Crude oilSource: Reuters & SMC
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ENERGY COMPLEX
Crude Oil
Overview
In the month of September crude oil prices
continued to tumble lower on global oversupply
concerns and stronger greenback .But some short
covering was witnessed at lower levels during latter
part of the month. On domestic bourses strong local
currency rupee has kept the prices upside capped.
Overall crude oil moved in range of $90.43- 95.91 in
NYMEX and 5526-5865 in MCX. Meanwhile
tensions in Israel, Iraq and Ukraine have supported
the prices. According to Energy Information
Administration “Crude inventories expanded by
3.67 million barrels to 362.3 million last week” U.S.
crude supplies have climbed to the highest level
since 2012 for this time of the year as production
surges amid the shale boom. Output rose by
248,000 barrels a day to 8.838 million during the
week ended Sept. 12, the most since March 1986.
Outlook
Crude oil futures are expected to move sideways
with volatile path. But some short covering can be
seen in the month of October 2014. Economic data
from US, Europe and China along with geopolitical
tensions in Iraq and Ukraine will give further
direction to the crude oil prices. Movement of
stockpiles in Cushing will also give direction to the
prices. The United States and France have both
launched air strikes against Islamic State targets in
Iraq as part of a U.S.-led campaign to "degrade and
destroy" the radical Sunni militant group, which has
seized a third of both Iraq and Syria. According to
National Oil Corp “Production in Libya climbed to
925,000 barrels a day” Meanwhile US refinery
problems or hurricanes can halt the typical autumn
price decline temporarily by reducing gasoline
production. According to data from the Energy
Information Administration” U.S. crude stockpiles
fell unexpectedly as imports dropped to their lowest
October 2014
level in four months” Crude oil can move in range
of 5350-6000 in the month of October.
NYMEX Crude oil biggest quarterly drop
since 2012
Slack demand for oil, a slew of weak macroeconomic
data out of China and the eurozone, a stronger dollar as
well as plentiful supplies that include surging output
from Libya dragged prices lower in third quarter of
2014. The front-month contract skidded more than 13%
over three months, the largest quarterly drop since the
second quarter of 2012.
Weak Asian demand
China and Japan, the two largest oil consumers in Asia,
consumed 1.6% less oil up to July this year, compared to
a year earlier, and with Asian demand so soft, supply will
have to adjust to balance the market.
OPEC output declined in September
Output from the 12-member OPEC rose by 413,000
barrels a day to 30.935 million in September, a
Bloomberg survey of oil companies, producers and
analysts showed. That's the highest level since August
2013.
US production increased
US domestic crude production rose to 8.87 million
barrels a day in the week ended September 19, the most
since March 1986, according EIA estimates.
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October 2014
Brent WTI Spread
Source: Reuters
Analysis: Brent WTI spread narrowed from nearly 9 in August to 3 last month. Surge in Libya production have
resulted in narrowing of this spread recently. This spread can move in range of 4-1 in October.
Some key points from EIA estimates
Liquid Fuels Consumption
EIA has revised total 2013 U.S. petroleum and other
liquids consumption upwards by 74,000 bbl/d to
18.96 million bbl/d. Upward revisions in motor
gasoline (69,000 bbl/d), special naphthas (66,000
bbl/d), and hydrocarbon gas liquids (HGL) (47,000
bbl/d) were offset by a 113,000 bbl/d reduction in
unfinished oils consumption. Total U.S. petroleum
and other liquids consumption rose by 470,000
bbl/d (2.5%) in 2013, the largest annual increase
since 2004. Motor gasoline consumption rose by
160,000 bbl/d (1.9%). High petrochemical demand
and a very wet corn crop late in the year contributed
to a 100,000 bbl/d (8.5%) increase in propane
consumption last year. Total consumption is expected
to fall slightly, by 0.2%, in 2014. A year-over-year
increase in total consumption of 170,000 bbl/d during
the first quarter is expected to be more than offset by an
average 150,000 bbl/d decline during the second half of
the year. Propane consumption retreats from last year's
growth, falling by an average of 110,000 bbl/d this year.
Distillate fuel consumption is projected to increase by
an average of 160,000 bbl/d (4.2%) in 2014.
Liquid Fuels Supply
The forecast for total U.S. crude oil production increases
from an estimated 7.45 million bbl/d in 2013 to 8.53
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October 2014
million bbl/d in 2014 and 9.53 million bbl/d in 2015.
The 2014 and 2015 forecasts are 0.07 million bbl/d
and 0.25 million bbl/d higher than in last month's
STEO, respectively. The highest previous annual
average U.S. production level was 9.6 million bbl/d
in 1970. Oil production from the Gulf of Mexico is
expected to increase from 1.25 million bbl/d in 2013
to 1.67 million bbl/d in 2015, with 11 projects
starting this year. Six projects began production in
the first half of 2014: Na Kika Phase 3, Mars B,
Dalmatian, Entrada, Atlantis Phase 2, and Tubular
Bells. Additional wells are expected to come online
in the fourth quarter of 2014 from the Cardamom
Deep, South Deimos/West Boreas, Hadrian South,
Jack/St. Malo, and Lucius projects.
Non‐OPEC Supply
EIA estimates that non-OPEC production grew by
1.4 million bbl/d in 2013, averaging 54.1 million
bbl/d for the year. EIA expects non-OPEC
production to grow by 1.8 million bbl/d in 2014 and
1.2 million bbl/d in 2015. The United States is the
leading contributor to forecast non-OPEC supply
growth, increasing by 1.4 million bbl/d in 2014 and
1.2 million bbl/d in 2015. EIA estimates that
Eurasia's production will increase by less than 0.1
million bbl/d in 2014, with increased production
from Russia and Kazakhstan offsetting declines in
other countries, and stay relatively flat in 2015. This
forecast assumes the current economic sanctions on
Russia do not affect Russian oil production in the
short term.
OPEC Supply
EIA estimates that OPEC crude oil production averaged
29.9 million bbl/d in 2013, a decline of 1.0 million bbl/d
from the previous year, primarily reflecting increased
outages in Libya, Nigeria, and Iraq, along with strong
non-OPEC supply growth. EIA expects OPEC crude oil
production to fall by 0.3 million bbl/d in 2014 and by 0.1
million bbl/d in 2015 to accommodate growing
production in non-OPEC countries. Unplanned crude
oil supply disruptions among OPEC producers
averaged 2.4 million bbl/d in August 2014, 0.1 million
bbl/d lower than the previous month mainly because of
decreased outages in Libya. Libya's production
increased to 0.5 million bbl/d in August, 0.3 million
bbl/d higher than the second quarter 2014 average, but
still well below the 1.4 million bbl/d the country
produced before the major blockades started in mid-
2013. Almost all of Libya's export terminals are able to
export crude as protestors agreed to stop the blockades,
and production has restarted in some of Libya's largest
eastern oil fields. However, some of the major issues
that incited the widespread protests over the past year
remain unresolved. As a result, EIA does not expect
Libya's oil production to recover to its preblockade level
over the forecast period.
Crude oil may remain on volatile path but some
short covering can be seen at lower levels in the
month of October. Geopolitical tensions can
give support to the prices while increase in
stockpiles can cap the upside. Global
macroeconomic numbers along with weekly
inventory data in US will also affect the overall
sentiments.
Range
Crude Oil
MCX Rs 5350-6000 per barrel
NYMEX $86-97 per barrel
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October 2014
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October 2014
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Natural Gas
Rise in natural gas output estimatesOverview
Natural gas output from the Marcellus shale Natural gas prices moved on volatile path in
formation in Appalachia may advance 1 percent in September 2014 as low demand and rising
October to 16 billion cubic feet a day from a month stockpiles pressurized the prices while warmer
earlier, the EIA said Sept. 8 in its monthly Drilling temperature increased the demand for air
Productivity Report. Record production from the conditioning. Overall it traded in range of $3.76-
unconventional drilling boom keeps capping the 4.16 in NYMEX and 228.90-257.50 in MCX. Last
market at around $4/mmBtumonth repairs on a Transco pipeline in Louisiana
were also curtailing supplies, with natural-gas flows
were unavailable to several directions for up to 10 EIA Natural gas estimates
days. The repairs, following the shutdown of a
pipeline that feeds Gulf of Mexico production to the U.S. Natural Gas ConsumptionHenry Hub delivery point in Louisiana.
EIA expects total natural gas consumption will
average 72.6 Bcf/d in 2014, an increase of 1.8% from
2013 led by the industrial sector. In 2015, total Outlooknatural gas consumption increases 0.2% as
Natural gas can move on volatile path in range of continued industrial sector growth offsets lower
225-275 in the month of October as weather residential and commercial consumption. Higher
concerns and position of stockpiles will give further natural gas prices this year contribute to a 2.0%
direction to the prices. Warmer temperatures in the decline in natural gas consumption in the power
eastern U.S. could drive demand for air sector to 21.9 Bcf/d in 2014. EIA expects natural
conditioning this week, though cooler temperatures gas consumption in the power sector to increase to
making their appearance in October could hike 22.8 Bcf/d in 2015.
demand for heating. The According to U.S. Energy
Information Administration “Natural gas storage in
the U.S. rose by 90 billion cubic feet during the week U.S. Natural Gas Production and Trade before” Injections of gas into storage have
EIA expects natural gas marketed production to surpassed the five-year average for 22 consecutive
grow by an annual rate of 5.3% in 2014 and 2.1% in weeks, alleviating concerns over tightening
2015. STEO projects that strong increases already supplies.
seen in the Lower 48 states this year will continue,
offsetting declines in the Gulf of Mexico. As of June,
the most recent month for which EIA data are US weather forecastsavailable, marketed production was 4.6 Bcf/d
Warmer temperatures are forecasted in much of the greater than it was in June 2013.
US, though separate predictions added coming back
of some cooler temperatures in much of Western
and North-Central region which is seen keeping the
overall climate normal while hurting demand for
the commodity. As per Bloomberg news, WSI Corp
recently said temperatures would be mostly normal
or higher than usual in the lower 48 states from Oct.
11 through Oct. 15.EN
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October 2014
Range
Natural gas
NYMEX $3.50- $4.30 per mmBtu
MCX Rs 225-275 per mmBtu
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October 2014
SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus.
Disclaimer:
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Pls. Contact
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October 2014
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