Weekly Newsletter

Commodity- 3 July 2017

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FOCUS OF THE WEEK

Crude oil prices remained firm, on the first trading day of 2H17, extending the recent rally for a 8th
consecutive day. Ending the first half at 46.04, the front-month WTI crude oil contract lost -14.82% from
December 2016, while the Brent contract was down -16.32% for the period. The recent strength was only a
brief recovery from the selloff. We refrain from being optimistic over the oil market outlook as higher oil
prices would trigger US shale investment and increase in output by those OPEC members which are
exempted from the production cut deal. Baker Hughes reported on Friday that the number of oil rigs slipped
-2 units to 726 in the week ended June 30, after climbing higher for 23 straight weeks. The market was also
thrilled in the middle of last week as the EIA reported that US crude production dropped -0.1M bpd last
week. We are concerned whether the decline would continue. Indeed, we view the decline in output as
temporarily driven by a storm passing through the Gulf of Mexico.

Meanwhile, some OPEC members are boosting production. Crude oil production from Libya, exempted from
the output cut deal, has hit 1.005M bpd, highest in 4 years, last month. This was only shy of the 1.13M bpd
production recorded n June 2013. Recall that Libyas output was merely at 0.69M bpd in the beginning of the
year. Production growth accelerated as Sharara, the countrys largest oil field, resumed production last
month. We believe Libyas production would go higher as Mustafa Sanalla, Chairman of State National Oil
Corp., noted in April that he would boost national output to 1.1M bpd by August. Nigeria, also exempted from
the deal, is expected to increase its output in coming weeks, with planned exports in August scheduled to hit
2M bpd. The rapid increase in output from these two countries is offsetting the OPEC/non-OPEC output cut
deal, despite high compliance level. Reuters estimated that OPEC oil output has increased +0.28M bpd in
June, although countries such as Saudi Arabia and Kuwait are reducing output.
For the week ahead, the US employment report (Friday) and the ISM manufacturing index (Wednesday),
together with the FOMC minutes, are under the spotlight. The US market will be closed on Tuesday for the
July Fourth holiday. US non-farm payrolls probably increased +173K in June, following a +138K addition a
month ago. The unemployment rate probably stayed unchanged at 4.3% for the month. The ISM
manufacturing index probably climbed +0.1 point to 55 in June, marking the indexs third-consecutive
month in the mid-50s range. In the Euro zone, the unemployment rate, PMI, retail sales and ECB minutes are
in focus. The regions unemployment rate, due Monday, probably slipped to 9.2% in June, from 9.3% a
month ago. The final readings for manufacturing and services PMIs (due Monday and Wednesday,
respectively) probably stayed unrevised at 57.3 and 54.7 respectively.
In Asia Pacific, the market is speculating whether the RBA would deliver a hawkish surprise in its July
meeting (Tuesday). After all, we expect policymakers to stand on the sideline and maintain its cash rate at
1.5%.

Commitments of Traders
With the exception of gasoline, speculators were bearish over the energy complex in the week ended June
27. Net LENGTH for crude oil futures fell -1 576 contracts from a week ago to 327 188. Heating oil drifted to
NET SHORT of 5 412 contracts while net LENGTH for gasoline rose +4 925 contracts to 39 212. Net SHORT for
natural gas increased +13 568 contracts to 30 305 for the week.
Speculators were bearish over the precious metal complex last week. Net LENGTH for gold plunged -19 003
contracts to 131 672, while that for silver futures fell -11 149 contracts to 35 532. For PGMs, net LENGTH for
platinum dropped -2 278 contracts to 10 533 while that for palladium slipped -707 contracts to 21 039.

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BULLION

GOLD

For the 24 hours to 23:00 GMT, the Gold rose 0.71% against the USD and closed at USD1255.8 per ounce on Friday, as the US Dollar weakened
against other currencies amid current political crisis in the US.
In the Asian session, at GMT0300, the pair is trading at 1252.5, with the gold trading 0.26% lower against the Dollar from Fridays close.
The pair is expected to find support at 1247.3667, and a fall through could take it to the next support level of 1242.2333. The pair is expected
to find its first resistance at 1257.3667, and a rise through could take it to the next resistance level of 1262.2333.

Gold is expected to find support at [1232.60-28076] and a fall through could take it to the next support level of [1212.50-27518] Gold is expected to find its
first resistance at [1268.90-29098] and a rise through could take it to the next resistance level of [1185.10-29562]

TECHNICAL LEVELS

COMMODITY EXCHANGE QUOTE S2 S1 R1 R2

GOLD COMMEX USD/OZ 1212.50 1232.60 1268.90 1185.10

GOLD MCX RS/10 GM 27518 28076 29098 29562

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SILVER

For the 24 hours to 23:00 GMT, the Silver rose 1.42% against the USD and closed at USD16.84 per ounce on Friday, tracking gains in gold
prices.
In the Asian session, at GMT0300, the pair is trading at 16.85, with the Silver trading 0.06% higher against the USD from Fridays close.
The pair is expected to find support at 16.6417, and a fall through could take it to the next support level of 16.4333. The pair is expected to
find its first resistance at 17.0167, and a rise through could take it to the next resistance level of 17.1833.

Silver is expected to find support at [16.50-38436] and a fall through could take it to the next support level of [16.10-37761] Silver is expected to find its
first resistance at [17.20-39580] and a rise through could take it to the next resistance level of [17.50-40049]

TECHNICAL LEVELS

COMMODITY EXCHANGE QUOTE S2 S1 R1 R2

SILVER COMMEX USD/OZ 16.10 16.50 17.20 17.50

SILVER MCX RS/KG 37761 38436 39580 40049

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ENERGIES

CRUDE OIL

For the 24 hours to 23:00 GMT, the Crude Oil rose 2.03% against the USD and closed at USD50.37 on Friday, on rising hopes that OPEC and
other oil producing nations would agree to extend output cuts in a meeting scheduled this week.
Meanwhile, Baker Hughes reported that US drillers added eight oil rigs in the week ended 19 May, bringing the total count to 720.
In the Asian session, at GMT0300, the pair is trading at 50.82, with the Crude Oil trading 0.89% higher from Fridays close.
The pair is expected to find support at 49.93, and a fall through could take it to the next support level of 49.04. The pair is expected to find its
first resistance at 51.3, and a rise through could take it to the next resistance level of 51.78.

Crude oil is expected to find support at [49.00-3140] and a fall through could take it to the next support level of [46.90-3010] Crude oil is expected to find
its first resistance at [52.30-3340] and a rise through could take it to the next resistance level of [53.30-3410]

TECHNICAL LEVELS

COMMODITY EXCHANGE QUOTE S2 S1 R1 R2

CRUDE OIL COMMEX USD/BBL 46.90 49.00 52.30 53.30

CRUDE OIL MCX INR/BBL 3010 3140 3340 3410

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NATURAL GAS

Natural gas futures for June delivery rose 7.4 cents to settle at $3.256 per million British thermal units, up 2.3% for the session but about 4.9%
lower for the week.

Natural gas is expected to find support at [3.20-202.90] and a fall through could take it to the next support level of [3.00-195.30] Natural gas is expected to
find its first resistance at [3.40-218.50] and a rise through could take it to the next resistance level of [3.60-226.30]

TECHNICAL LEVELS

COMMODITY EXCHANGE QUOTE S2 S1 R1 R2

NATURAL GAS COMMEX USD/MMBTU 3.00 3.20 3.40 3.60

NATURAL GAS MCX INR/MMBTU 195.30 202.90 218.50 226.30

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BASE METALS

COPPER

Copper prices climbed to the highest level in more than two weeks Friday, as a threatened labor strike at a mine in Indonesia looked set to
disrupt supplies.

Copper climbed 2.19% to $2.58 a pound

Copper is expected to find support at [2.50-360.80] and a fall through could take it to the next support level of [2.40-352.10] Copper is expected to find its
first resistance at [2.60-374.20] and a rise through could take it to the next resistance level of [2.70-378.90]

TECHNICAL LEVELS

COMMODITY EXCHANGE QUOTE S2 S1 R1 R2

COPPER COMMEX Cents/Lb 2.40 2.50 2.60 2.70

COPPER MCX INR/Kg 352.10 360.80 374.20 378.90

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Indian Economic Calendar

Economic Calendar

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Disclaimer

The recommendations made herein do not constitute an offer to sell or a solicitation to buy any securities mentioned. Readers using the
information contained herein are solely responsible for their actions. The information and views contained herein are believed to be reliable but
no responsibility or liability is accepted for errors of facts and opinions. Editors may or may not have trading or investment positions in the
securities mentioned herein.

Report by,

Research Analyst

Desh Deepak
_____________________________________________________________________

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