Energy

Crude oil futures were lower on Tuesday but had bounced well above earlier lows after the Federal Reserve unexpectedly cut its benchmark overnight lending rate 75 basis points to 3.5 per cent hoping to reduce market fears about a US recession.

· MCX Crude Oil Feb registered days low at Rs. 3395 per barrel, but bounce back to trade high above Rs. 3500per barrel, similarly Nymex Crude oil was trading at $89.31 per barrel and registered days low at $86.11

· TheCentral U.S., west of theGreat Lakes and as far south asKansas, experienced single digit temperatures or colder this morning. The 6 to 10 day forecast from the National Weather Service is expecting above average temperatures for the eastern third of theU.S. March crude oil is steady to lower. March natural gas is steady to lower.

· The Federal Reserve surprised the markets this morning by cutting the federal funds rate .75% to 3.50%. Will it be enough to stop the selling panic in the stock market? The Open Market Committee meeting is scheduled for next Tuesday and Wednesday.

· Iraq has extended until Feb 18 the deadline for foreign oil companies to apply for service contracts linked to exploitation of its vast crude reserves, the oil ministry said.

· Production hike by OPEC seems unlikely looking at the recent sharp correction in the crude oil prices. The cartel might again avoid hike in production in its forth-coming meeting saying the market is well supplied for the reduced in a recessionary environment. Slow down in economic activity might hurt the energy demand. Venezuela's Rafael Ramirez said on Monday he does not believe OPEC needs to increase output.

· Demand for refined fuels like heating oil and gasoline is weakening due to milder winter weather and higher prices, leading some refiners in theUnited States,Europe andNortheast Asia to cut back output.

MCX Crude Oil Feb (Daily Chart)



Technical Outlook:

Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from overbought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 9-day moving average. The upside closing price reversal on the daily chart is somewhat positive.

Recommendations:

MCX Crude Oil Feb: Sell at 3515-3520 for target of 3460 and 3430 with stop loss at 3565

MCX Natural gas Feb (Daily Chart)



Technical Outlook:

Momentum studies are bearish but are now at oversold levels and will tend to support reversal action if it occurs. The daily stochastics have crossed over down which is a bearish indication. The stochastics indicators are decreasing from overbought level, which is bearish and should support lower prices. The market's short-term trend is negative as the close remains below the 9-day moving average. The upside closing price reversal on the daily chart is somewhat positive.

Recommendations:

MCX Natural Gas Feb: Sell at 306-305 for the target of 298 and 294 with stop loss at 313.20

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