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SPECIAL MONTHLY REPORT ON
ENERGY(August 2018)
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ENERGY PERFORMANCE (July 2018) (% change)
ENERGY PERFORMANCE (January - July 2018) (% change)
Natural Gas
Crude oil
Natural Gas
Crude oil
August 2018
-6.92
-7.27
-3.98
-4.79
-8.00 -7.00 -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00
MCX
NYMEX
22.96
14.91
1.63
-4.47
-10.00 -5.00 0.00 5.00 10.00 15.00 20.00 25.00
MCX
NYMEX
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ENERGY COMPLEX
Overview
In the month of July crude oil prices have seen
selling pressure at higher levels as stronger
greenback and fear of slow global economic growth
kept the prices downbeat. Recently finance
ministers and central bank governors from the G20
warned that global economic growth risks have
increased amid rising trade and geopolitical
tensions. Overall it managed to hover in range of
$67.03-75.27 in NYMEX and 4585-5173 in MCX.
The U.S. Energy Information Administration stated
that domestic crude production reached a record 11
million bpd. U.S. energy companies cut the number
of oil rigs by the most since March as the rate of
growth has slowed over the past month or so with
recent declines in crude prices. Prospects of higher
output from OPEC rose after Saudi Arabia to offer
extra crude supplies to some customers.
Outlook
Crude oil prices may continue to move sideways to
upside path on tighter market conditions. Recently
Saudi Arabia halting crude transport through a key
shipping lane coupled with falling U.S. inventories
supporting the prices. Market players will be looking
towards the weather in August month especially for
any signs of potential hurricanes as adverse weather
conditions can have a significant impact on the oil
market, potentially causing severe supply
disruptions. Saudi Arabia's Energy Minister Khalid
al-Falih stated that the world's top exporter was
"temporarily halting" all oil shipments through Bab
El-Mandeb strait immediately, after an earlier
attack on two crude vessels by the Iran-aligned
Houthi movement. According to the U.S. Energy
Information Administration, around 4.8 million
barrels per day of crude oil and refined products
flowed through the Bab al-Mandeb strait in 2016
toward Europe, the United States and Asia.
Elsewhere, China's crude oil imports from the US for
July have fallen sharply from June, and are expected
to drop even further for August.
Crude oil can take support near 4450-4500 and
buy on dips strategy should be used for upside
level of 5000.
Key News
Instability in Libya is supporting crude
higher
Libya’s oil production seesawed recently because of a
stand-off at eastern export terminals and the abduction
of two workers at Sharara oilfield. Military clashes
followed by a political power struggle forced the
National Oil Corporation (NOC) to halt exports at Ras
Lanuf, Es Sider, Zueitina and Hariga terminals in late
June and early July, threatening to keep as much as
850,000 barrels per day (bpd) offline. Libya's national
oil production fell to 527,000 barrels per day (bpd) from
a high of 1.28 million bpd in February following recent
oil port closures, the head of the National Oil
Corporation (NOC).
Falling Venezuela production
Venezuelan oil production crashed to a new 30-year low
of 1.5 million barrels a day in June, the Organization of
the Petroleum Exporting Countries (OPEC) stated
recently. The South American nation earns 96 percent
of its revenue through oil sales but a lack of foreign
exchange has sparked economic paralysis that has left
the country suffering serious shortages of food and
medicine. According to the International Monetary
Fund (IMF), Venezuela's economic collapse is one of the
worst in modern history. The economy has shrunk 45
percent since 2013 and the IMF expects it to contract 15
per cent in 2018 alone, with inflation reaching 13,800
per cent.
Highlights of latest EIA report
EIA estimates that U.S. crude oil production averaged
10.9 million barrels per day (b/d) in June, up 0.1 million
b/d from the May level. EIA forecasts U.S. crude oil
production to average 10.8 million b/d in 2018, up from
9.4 million b/d in 2017, and to average 11.8 million b/d
August 2018
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in 2019. If realized, both of these forecast levels
would surpass the previous record of 9.6 million b/d
set in 1970.
EIA forecasts that total U.S. crude oil and petroleum
product net imports will fall from an annual average
of 3.7 million b/d in 2017 to an average of 2.4 million
b/d in 2018 and to an average of 1.6 million b/d in
2019, which would be the lowest level of net imports
since 1958.
EIA forecasts total global liquid fuels end-of-year
inventories to be unchanged in 2018 compared with
2017, followed by a rise of 0.6 million b/d in 2019.
Forecast global liquid fuels balances indicate a
looser oil market in the second half of 2018 and
through the end of 2019 compared with the tight oil
market conditions that prevailed for 2017 and the
first half of 2018. Although global petroleum and
other liquid fuels inventories declined by an average
of 0.5 million barrels per day (b/d) in 2017, EIA
expects inventories to be relatively unchanged in
2018 and to increase by 0.6 million b/d in 2019.
Global Petroleum and Other Liquid
Fuels Consumption
Global consumption of petroleum and other liquid
fuels grew by 1.6 million b/d in 2017, reaching an
average of 98.5 million b/d for the year. EIA expects
consumption growth to average 1.7 million b/d in
2018 and in 2019, driven by the countries outside of
the Organization for Economic Cooperation and
Development (OECD). Non-OECD liquid fuels
consumption growth accounts for 1.3 million b/d of
the global growth in 2018 and in 2019. The non-
OECD liquid fuels consumption growth is driven by
forecast growth in non-OECD gross domestic
product (GDP) that averages 4.1% in 2018 and in
2019.
Non OPEC Petroleum and Other Liquid
Fuels Supply
EIA forecasts that non-OPEC petroleum and other
liquid fuels supply will increase by 2.6 million b/d in
2018. Combined production growth of 2.4 million b/d
in the United States and Canada accounts for most of
the 2018 supply growth. EIA expects non-OPEC
petroleum and other liquid fuels production to rise by
another 2.3 million b/d in 2019. Combined production
growth of 1.7 million b/d in the United States and
Canada is again forecast to contribute most of this
growth, and Brazil’s production is expected to grow by
0.3 million b/d in 2019.
Brent WTI Spread
Analysis: Brent WTI crude oil spread widened from
below 3 to above 5.5. Overall it can hover in range of $3-
7 in the month of August.
Source: Reuters
August 2018
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August 2018
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August 2018
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Natural Gas
Overview
Natural gas traded on weaker path last month as
increase in US production and lower demand kept
the prices under pressure. Overall it traded in range
of $2.7-2.92 in NYMEX and 186.80-200.80 in MCX
in the month of July. In recent months, the biggest
factor affecting the U.S. gas market has been
speculation on whether production, which is at
record levels, would be enough to cut the vast
storage deficit and boost stockpiles to near-normal
levels before the winter. Prices have been trading on
the defensive as cooler than normal weather is
spreading east to west which should reduce cooling
demand for natural gas during the peak of the
summer season.
Outlook
Natural gas can continue to remain on sideways
path as weather related demand to give further
direction to the prices. The weather is expected to
be warmer than normal over the next 8-14 and 6-10
day forecast according to the National Oceanic
Atmospheric Administrations.
Natural gas can trade with sideways to weak
bias as it can face resistance near 205 and
can take support near 176 in the month of
August.
According to the Forecasters at
NatGasWeather
The current weather conditions show that weather
is moving west to east with a standard zonal flow. It
also appears that a troughing pattern is developing
where warm weather is pushing up and covering
most of the mid-west. The weather is expected to be
warmer than normal over the next 8-14 and 6-10 day
forecast according to the National Oceanic Atmospheric
Administrations. Warmer than normal weather will
increase power demand especially in Southern
California where natural gas is used to generate
electricity.
EIA estimates of Natural gas
U.S. dry natural gas production averaged 73.6 billion
cubic feet per day (Bcf/d) in 2017.EIA forecasts dry
natural gas production will average 81.3 Bcf/d in 2018,
which would establish a new record. EIA expects
natural gas production will rise by an additional 3.1
Bcf/d in 2019 to 84.5 Bcf/d.
Natural Gas Consumption
Total U.S. natural gas consumption averaged 74.2
billion cubic feet per day (Bcf/d) in 2017 and is forecast
to increase by 7% to 79.7 Bcf/d in 2018 before slightly
decreasing to 79.6 Bcf/d in 2019. In 2018, increases in
total natural gas consumption are mainly attributable to
higher electric power sector use, which is forecast to
increase by 2.4 Bcf/d (10%) from 2017 levels. The 2018
increase also reflects higher residential and commercial
demand because the first quarter of 2018 was colder
than the first quarter of 2017.
Natural Gas Production and Trade
EIA estimates that dry natural gas production will
average 81.3 Bcf/d in 2018, an 11% increase from 2017
levels. In 2019, production is expected to rise by another
4%, averaging 84.5 Bcf/d for the year. The expected
growth in natural gas production is largely in response
to improved drilling efficiency and cost reductions, as
well as higher crude oil prices that contribute to higher
associated gas production from oil-directed rigs.
Forecast natural gas production growth is supported by
planned expansions in liquefied natural gas (LNG) and
pipeline exports.
EN
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August 2018
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August 2018
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August 2018
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Vandana Bharti (AVP - Commodity Research) Boardline : 011-30111000 Extn: 625 [email protected]
Sandeep Joon Sr. Research Analyst (Metal & Energy) Boardline : 011-30111000 Extn: 683 [email protected]
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