May 11, 2012 Crude Oil and Natural Gas Update

Asian stocks are heading for their worst week in almost six months as political changes in France and growing instability in Greece threaten to derail austerity plans and worsen Europe’s debt crisis.  An Asian export slump exacerbated by Europe’s sovereign debt crisis and an uneven recovery in the US is putting pressure on policy makers to pledge stimulus measures to boost growth.

Currently during the Asian session, Crude oil futures prices are trading below $96/bbl with fall of more than 1 percent in Globex electronic platform. Concern of Euro-zone debt crisis which may lead to lower oil demand and higher stock piles are continue to weigh on oil prices movement.  As per OPEC, Iraq the member country is seeking to double its production by 2015. This March production has increased by more than 7 percent, whereas fall in Iran production is seen. Overall, production has increased by OPEC countries. US stock piles are also above 22 years high in Cushing delivery centre. From Economic front, most of the Asian equities are trading in a negative note on concern of rising European debt crisis. Greece is waiting for another round of vote to form a new government, which is keeping Euro under pressure. Monetary easing concern has arrived due to lower inflation data reported today early morning. So, by taking negative cues from above mentioned factors we may expect oil prices to trade under pressure during Asian and European session. Likewise, in the evening session also economic releases in the form of University of Michigan Confidence is likely to decline, which may create negative impact on oil prices.

At present, gas futures prices are trading below $2.450, with fall of more than 0.50 percent from yesterday’ closing. This, may be a technical correction on prices after such a long drive of bullish trend, as fundamental remain unchanged for gas prices. Today, we may expect gas prices to trade in a positive trend. As per US Energy department, natural gas storage has increased by 30 Bcf, which is higher than prior week storage data and lower than survey. Thus, higher production level may limit the gains in gas prices. On the other side, as per Midwest Weather Channel, weather is expected to remain warmer than normal for couple of weeks, which may support gas demand to rise.

While markets are in risk aversion mode, most commodities have been lower; Natural Gas has been the surprise. As the USD continues to climb to recent highs, we expect that energy and metals will continue to be depressed.

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