Commodity Research Weekly Report Ways2Capital 23 Feb 2015

INDORE, India - Feb. 25, 2015 - PRLog -- ✍MCX - WEEKLY NEWS LETTERS

India Budget 2015-16: Oil and Gas sector hopes for clarity on subsidy sharing formula

This is an important period in the India oil sector given the falling global crude prices. The upcoming Union budget would be critical in this regard.Falling crude prices have resulted in lower under-recoveries and working capital requirements for oil marketing companies (OMC). However, it has affected the profitability of upstream companies such as ONGC and OIL.The oil ministry has proposed a new subsidy sharing proposal by which upstream companies would not make any contributions towards subsidy burden if crude prices are at or below $60 per barrel, would bear 85% subsidy burden when crude oil prices exceed $60 a barrel and is less than or equal to $100 a barrel, and would bear 90% subsidy burden if crude oil price exceeds $100 per barrel.

A concrete subsidy sharing formula would provide visibility over earnings of upstream oil companies and hence, it would be positive for them (ONGC, Oil India and GAIL), the report said.The government is also likely to re-introduce 2.5-5% customs duty on import of crude oil, which will be positive for Cairn India and negative for private refiners and OMCs.

✍ Gold drops to 1-1/2 month low on sliding demand; silver gains

Gold prices drifted to hit its lowest levels in 1-1/2 month at the domestic bullion market here due to sluggish demand from jewellery stockists as well as poor local buying sentiment.

On the other hand, silver moved up marginally on the back of stray industrial demand.

Standard Gold (99.5 purity) declined by Rs 95 to end at Rs 26,625 per 10 grams from Wednesday's closing level of Rs 26,720.

Pure gold (99.9 purity) also fell by a similar margin to finish at Rs 26,775 per 10 grams compared to Rs 26,870.

However, price of silver (.999 fineness) edged up by Rs 25 to settle at Rs 37,685 per kg as against Rs 37,660 previously.

On the global front, the shiny-metal regained some lost ground on safe-haven demand amid continued uncertainty over Greece.
Spot gold was bid higher at USD 1,211.45 an ounce in early European trade, while silver inched up to 16.42 an ounce.

✍ Gold Holding Above $1,200 as Macro Uncertainties Abound

The U.S. Comex gold futures rose 0.62% on Thursday to $1,207.60 after dropping to an intra-day low of $1,197.20 on Wednesday. Week-to-date, the gold futures fell 1.59% while the S&P 500 Index was flat, the Euro Stoxx Index rose 1.17%, and the CRB Commodities Index fell 1.28%. The Dollar Index continues to be in a narrow range of 93.80 to 94.50 all week. The U.S. ten-year Treasury yield rose 6bp to 2.1142% while the German ten-year Bund yield rose 4bp this week to 0.38% on Thursday.

Macro and Political Events
The market will monitor the discussions among the finance ministers in Brussels on Friday on the Greece’s request to extend the loan agreement with fewer conditions. At the same time, the ECB plans to ask the Greek banks to lower their holdings of government bonds if the talks fail, thus putting more pressure on the Greek government. The Fed minutes released on Wednesday had a dovish tone given many Fed governors preferred not to hike interest rates prematurely as the strong dollar hurts net exports while the economic recovery is still moderate. Dealers’ expectations of a June rate hike declined from 23% a week ago to 18% after the Fed minutes release according to Bloomberg. Elsewhere in Japan, the central bank has decided not to ease monetary policy further saying that the inflation expectations have not dropped more because of the lower oil prices.

Investors’ Demand
The holdings of the largest gold-backed ETF, the SPDR Gold Trust, rose about eight percent this year by 60 metric tons to 769.46 metric tons on Wednesday, down about 30 tons since a year ago. The gold investors’ sentiments have rebounded somewhat this year given the uncertainty in the currencies, interest rates, and politics around the world. Dealers are expecting the physical demand to rise starting at the end of February when the Chinese New Year holidays end. The gold prices may jump on the positive expectations of a cut in India’s gold import duty. A lifting of the ban on consignment deals by the Indian government has also given hope to more gold imports in the coming months.

Greece, euro zone agree four-month loan extension, avert crunchFinance ministers agreed in principle on Friday to extend Greece’s financial rescue by four months, averting a potential cash crunch in March that could have forced the country out of the currency area.

The deal, to be ratified once Greece's creditors are satisfied with a list of reforms it will submit next week, ends weeks of uncertainty since the election of a leftist-led government in Athens which pledged to reverse austerity.

"Tonight was a first step in this process of rebuilding trust," Jeroen Dijsselbloem, chairman of the 19-nation Eurogroup, told a news conference. "We have established common ground again to reach agreement on this statement."

The agreement, clinched after the third ministerial meeting in two weeks of acrimonious public exchanges, offers a breathing space for the new Greek government to try to negotiate longer-term debt relief with its official creditors.

But it also forced radical young Prime Minister Alexis Tsipras into a major climbdown since he had vowed to scrap the bailout, end cooperation with the "troika" of international lenders and roll back austerity.

European Union paymaster Germany, Greece's biggest creditor, had demanded "significant improvements" in reform commitments by Athens before it would accept an extension ofeuro zone funding.

The two main combatants around the table put a radically different gloss on the result.

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