Crude inventory build-up limits oil price upside, rupee might head to 74 levels & gold glitters due to weak equities and trade tensions

19th Jan – 25th Jan

1. Correlation between rupee and oil may send rupee towards 74

January 24, 2019

Dollar and crude have a positive co-relation. The Indian currency movement is currently focused on crude, thus making the rupee react to rising crude oil prices. There are several reasons why we feel crude oil prices will increase going forward. The Indian rupee recovered in the latter half of 2018 when crude prices had softened, and now again crude prices have started moving from the recent lows which gives a signal that the rupee may reach upto 74 levels again.

Source: Economic Times

2. US oil production and crude inventories increase limiting upside in oil prices

January 24, 2019

US crude production rose by more than 2 million barrels per day (bpd) last year to a record 11.9 million bpd. The EIA expects U.S. production to grow by 1.7 million bpd, with the rise slowing down further in 2020 to 1.2 million bpd.

EIA Report - U.S. crude oil inventories went up by 8 million barrels in the week to January 18, at 445 million barrels, which were about 9 percent above the seasonal limits. The EIA reported a build of 4.1 million barrels for gasoline and a decline of 600,000 barrels for distillate fuel.

The American Petroleum Institute (API) reported a large crude oil inventory build of 6.55 million barrels for the week ending Jan 18, compared to expectations of the small draw of 42,000 barrels.


3. Gold receiving momentum support from weak equities and dollar

January 23, 2019

Strength in precious metals is mainly due to the weakness in equities and a minor correction in the dollar index is also providing strength to the yellow metal. People are starting to run towards gold as a safe haven. The stock markets turned negative on jitters over U.S. politics and the state of the world economy. Trade negotiations between the United States and China were also dealt a blow as Beijing vowed a response.

Source: Reuters

4. US oil output rising, chances are that US may become a net exporter in 2020 for the first time in nearly 70 years

January 23, 2019

U.S. oil production is likely to set new records through 2027. The U.S. Energy Information Administration expects shale output to rise further, but says production growth will slow in the coming years. The U.S. will start exporting more energy products than it imports next year, the U.S. Energy Information Administration says. The U.S. is set to become a net energy exporter in 2020 for the first time in nearly 70 years.

Source: CNBC

5. Consumers stay away from jewelry during the peak wedding season

January 22, 2019

At some places, sales were nearly 70% down as per media reports and such a drastic drop during the festival and wedding season has never been seen before. Even during the worst of economic slowdowns in the past, the situation was not that bad. Retailer jewelersare passing through a massive slowdown because rural sales have been particularly hit, with slowing growth in agriculture affecting farmers’ incomes and reducing their purchasing power.

Source: Business Standard

6. India to replace China in 2019 for its oil consumption

January 22, 2019

On account of increasing commercial vehicle sales and sustainable infrastructure growth to support increasing demand for oil, India will surpass China to become the second largest oil demand growth centre globally in 2019. It is believed that transport fuels – gasoline and diesel – and residential LPG will continue to be the two main drivers of oil demand growth. India consumed 206.2 million tonnes (over 4 million bpd) in the 2017-18 fiscal year. Last August, the oil cartel OPEC projected India’s oil demand to rise by 5.8 million barrels per day (bpd) by 2040, accounting for about 40 per cent of the overall increase in global demand during the period.

Source: Indian Express

7. Silver just completed its worst year in three, looks for industrial demand this year

January 19, 2019

Silver has an industrial component, and industrial metals have been “weighed down by slowing global growth concerns last year. Silver being an industrial metal, global economic growth forecast directly affects its demand. Even the precious metals demand side is not picking up as people are finding gold more attractive at current rates than silver.

Source: Bloomberg

8. Indian aluminium producers facing challenges due to China import policy

January 21, 2019

China is using protective measures and has classified ‘aluminum scrap' as a restrictive import. This new policy will be effective from Jul'19 and China aims to completely ban imports of scrap and waste by 2020. Aluminum producers fear that additional scrap will be imported to India and industry players demand to put a 10% import duty on all aluminum variants.

Indian imports rose almost 24% between April-Oct, which is nearly 60% of domestic consumption. Indian companies such as National Aluminium Company (Nalco), Vedanta Ltd. and Hindalco Industries are facing this heat and they demand a strict policy to protect the domestic producers from such dumping.

Source: Business Standard