Energy

MCX crude moved above Rs.3,800 per barrel level today tracking the upturn movement on international exchange. Nymex crude edged up and breached $97 per barrel in the electronic trade session today after registering a 1.3% leap in the previous session which marked its first rise in four trading sessions.

· Militant activity has already affected 20% of oil exports from Nigeria since 2006. MEND, the main militant group in Nigeria, had earlier said that its goal remains to paralyze 100% of Nigeria's oil exports in one swipe.

· As per Dow Jones newswires, Reuters reported Tuesday that armed groups are stockpiling weapons and supplies in preparation for a major attack on an oil facility in Nigeria.

· Also in the background are tensions between US and Iran, an Opec member state. Tension rose last weekend as Iranian boats harassed and provoked three U.S. Navy ships in the Strait of Hormuz threatening to explode them.

· US President arrived in Israel today initiating his trip aimed at refreshing stalled Middle-east peace talks and for pressing the need to keep a check on Iran. Ahead of the arrival of US President, Palestinian militants fired 12 rockets and shells towards southern Israel, as reported by Dow Jones newswires. Earlier today Israeli forces had hit Palestinian militants firing projectiles from three points in the Gaza Strip.

· US has continued to press for a third round of UN sanctions on Iran for its stand on continuing its nuclear research even as a US intelligence report noted that Iran has halted weapon develpment development program in 2003.

Weekly Inventory Data:

· US crude inventories fell much further than expected in the week to Jan 4 and are in the lower half of the average range for this time of year, according to the US Energy Information Administration.

· Crude stocks dropped by 6.8 mln barrels, far more than expectations for a drop of 1.2 barrels. But Distillates stocks, which include heating oil, rose by 1.5 mln barrels, confounding expectations for a rise of just 100,000 barrels.

· Heating oil is in focus as the peak winter demand period begins. Meanwhile, gasoline stocks rose by 5.3 mln barrels, well above the forecast for a 1.5 mln barrel increase.

· Turning to refineries, the EIA said they operated at 91.3 pct of their capacity, up 0.9 percentage points from 89.4 pct in the previous week. Analysts had expected refinery runs to rise by 0.2 percentage points.



MCX Crude Oil Jan (Daily Chart)



Technical Outlook:

Momentum studies have turned bullish; will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are increasing from over sold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 18-day EMA. The downside closing price reversal on the daily chart is somewhat positive.

Recommendations:

MCX Crude Oil Jan: sell at 3790-3800 for target of 3750 and 3720 with stop loss below 3825



MCX Natural gas Jan (Daily Chart)



Technical Outlook:

Momentum studies have turned bullish; will tend to support reversal action if it occurs. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are increasing from over sold level, which is bullish and should support higher prices. The market's short-term trend is positive as the close remains above the 18-day EMA. The downside closing price reversal on the daily chart is somewhat positive.

Recommendations:

MCX Natural Gas Jan: Sell at 322-323 for the target of 315 and 311 with stop loss at 326

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