Posts Tagged ‘Natural gas’

Ace Derivatives & Commodity Exchange

Ace Derivatives & Commodity Exchange with over five decades of impeccable experience in commodity trading, has recently transformed itself and established an online multi-commodity platform with a pan-India presence. Kotak Group is the anchor investor in ACE Commodity Exchange with a 51 per cent stake, while Haryana”s Hafed has a 15 per cent interest and banks like Bank of Baroda, Union Bank and
Corporation Bank have an over 14 per cent stake. The remaining equity is held by Ahmedabad Commodity Exchange members.

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Products offered

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Ace offers futures trading the following commodity groups:

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Bullions: Gold, Silver

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Energy: Crude oil, Natural Gas

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Agri

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•Castor Seed (Ex-Warehouse Ahmedabad)

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•Mustard Seed (Ex-Warehouse Jaipur-inclusive of all taxes but exclusive of Sales tax/ VAT)

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•Soybean Ex-Warehouse Indore -inclusive of all taxes but exclusive of Sales tax/VAT)

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•Refined Soy Oil (Ex-Tank Indore-Inclusive of all Taxes and Levies)

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•Pulses

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•Chana

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•Spices

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•Turmeric

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The Kotak-anchored exchange started futures trading in soybean, soyoil, rape/mustard seed, chana and castor seed. With the launch, the first set of contracts will be available for trade for delivery on November 20, December 20 and January 20.

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The lot size of trading is fixed at 10 tonnes of each contract. According to the exchange data, the castor seed contract for December-expiry opened at `3,442 a quintal, chana at `2,440 a quintal, soyabean at `2,244 a quintal, mustard seed at `573 for every 20 kg and refined soy oil at`545.90 for every 10 kg.

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Trade Timings:

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Agri: 10:00 a.m. to 05:00 p.m. (Monday to Friday)

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10:00 a.m. to 2:00 p.m. (Saturday)

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Bullion/Metals: 10:00 a.m. to 11.30 p.m. (Monday to Friday)

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10:00 a.m. to 2:00 p.m. (Saturday)

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Risk Management

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The Exchange assumes the counter party risk by guaranteeing trade settlement. The Risk Management framework of the Exchange ensures timely settlement.

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More hands working on…..

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Haryana State Cooperative Supply and Marketing Federation (Hafed) is planning to set up spot exchanges of the recently launched Ace Derivatives and Commodity Exchange (ACE) in mandis soon. The association of Hafed with the ACE will help it in playing the role of an aggregator and a risk manager on behalf of thousands of farmers, who will be motivated to become participants of the ACE in the coming decade.

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In addition to its convenient trading platform, Ace provides a robust clearing & settlement infrastructure that supports the complete process of trade intermediation – including registration of trades, settlement of contracts and mitigation of counter party risk; giving traders the peace of mind in times of increased market volatility.

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OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,
http://www.smctradeonline.comhttp://www.smcwealth.com

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NATURAL GAS……….. THE FUEL OF THE 21ST CENTURY

Natural gas has emerged as the most preferred fuel and vital component of theworld’s supply of energy due to its environmentally cleanest, safest and most useful nature, greater efficiency and cost effectiveness among all energy sources.Natural gas is a mixture of hydrocarbon gases. In its purest form, such as the naturalgas that is delivered to your home, is almost pure methane.

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Growing importance: We require energy constantly, to heat and cook food, and generate electricity. Due to clean burning and lower emission levels of potentiallyharmful byproducts into the air as compared to other fossil fuels, the importance of natural gas in our lives is growing constantly. The demand of natural gas has sharplyincreased in the last two decades at the global level. In India too, the natural gas sector has gained importance, particularly over the last decade, and is being termedas the fuel of the 21st Century.The industrial and electricity sector accounts for the greatest proportion of natural gas use across the world. The US residential sector consuming the second greatestquantity of natural gas.

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Global Production: According to U.S. Department of Energy, globally total provedreserves of natural gas is 6,254.364 trillion cubic feet (tcf) in 2009 with an increase of0.68% as compared to 2008. Russian federation has largest reserve of 1,680.00 tcffollowed by Iran and Qatar with 991.600 and 891.945 tcf reserve respectively. Russiais largest producer of natural gas with 23 tcf followed by USA with over 20 tcf. Majorexporters of piped natural gas are Russia (154 bcm), Canada (103 bcm) and Norway(93 bcm), the major importers are US (104 bcm), Germany (87 bcm) and Italy (75bcm). The major exporters of CNG are Qatar (40 bcm), Malaysia (29 bcm), Indonesia(27 bcm) and the major importers are Japan (92 bcm), South Korea (36 bcm) andSpain (30 bcm.)

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Production in India: Natural gas production in India grows at averaging 11.7percent per year. Total production is estimated to grow from 1.1 trillion cubic feet in2007 to 2.7 trillion cubic feet in 2015. Most of the production of gas comes from theWestern offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Fertilizer (41%) and power (37%) are themajor users of natural gas in India.

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Factors affecting demand for Natural Gas: There are two primary drivers thatdetermine the demand for natural gas in the short term-Weather and Fuel Switching.Natural gas demand typically peaks during the coldest months for heating homes anddips during the warmest months, with a slight increase during the summer to meetthe demands of electric generators. Hurricanes and severe weather also disrupt the supply.

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While most residential and commercial customers rely solely on natural gas to meetmany of their energy requirements, some industrial and electric generationconsumers have the capacity to switch between fuels. For instance, during a periodof extremely high natural gas prices, many electric generators may switch from using natural gas to using cheaper coal, thus decreasing the demand for natural gas.

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Generally the state of the U.S. economy can have a considerable effect on thedemand for natural gas in the short term, particularly for industrial consumers. When the economy is expanding or declining, the consumption of natural gas fromindustrial sectors is generally increasing or decreasing at a similar rate.Long term demand factors reflect the basic trends for natural gas use into the future.The analysis of factors that affect long term demand across all sectors arecomplicated.

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Probably the most important long term driver of natural gas demand isfuture residential heating applications. Due to the retirement of old nuclear,petroleum, and coal powered generation plants leaves a significant requirement fornatural gas use for electric generation to meet the commercial demand forelectricity generation and transportation.

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Outlook: Currently the future prices of natural gas in MCX are trading in sidewaysmanner. It has strong support at `170. Seasonal demand from mid oct can support therecovery upto `220 in mid term.

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NATURAL GAS “Volatile by Nature, getting ahead” Final Part :)

3. Active hurricane forecasts may underpin prices

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The numbers are out. An active storm season is predicted for the Atlantic and natural gas-related ETFs are already gearing up and moving on the news. More storms than “normal” – about 16 – are anticipated to hit the Atlantic coast of  the United States this season. Of these, eight are expected to become hurricanes and about four of them are going to be intense, according to the Tropical Storm Risk.

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The forecast joins a growing number of predictions that the 2010 Atlantic hurricane season, which starts June 1, will be among the most active on record. As the number of hurricanes rises, so do the chances of one striking the oil-rich Gulf of Mexico or Florida’s crop areas.

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The Gulf is home to about 30% of U.S. oil and 12 % of U.S. natural gas production, the U.S. Energy Department says. It also has seven of the 10 busiest U.S. ports, according to the Army Corps of Engineers. Meanwhile, BP is still trying to cap a leaking offshore oil well that has created a devastating slick that is washing up in Louisiana. Attempts to stop the oil will be hampered if and when a tropical storm or hurricane passes through the Gulf of Mexico.

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4. Warm Weather

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It is expected that temperatures in the Northeast and Midwest, the key gas consuming regions, to average above normal in the coming days, with highs frequently climbing to the mid-80s Fahrenheit area. However, a healthy economic recovery also could trigger a strong gain in industrial demand this year, which accounts for nearly 30 percent of total gas consumption.

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Crude Oil & Natural Gas Ratio

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Historically, the price of oil and natural gas has moved in tandem because the demand for both commodities move up or down in conjunction with the economy and weather. The historical oil-to-gas price ratio has ranged from 6:1 to 13:1. For example, at a 10:1 ratio, if the price of natural gas is $7 per MMBtu, then the value or price per barrel of crude oil is expected to be around $70 per barrel. This oil-to-gas price ratio move up and down based on current and expected future events, particularly if there is political unrest.

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However, the oil-to-gas price ratio changed dramatically in the middle of 2009. As crude oil climbed to over $80 per barrel & natural gas NYMEX prices fell to $4 per MMBtu, taking the oil-to-gas price ratio to 20:1.Because of the wide price ratios last summer, some investment companies urged investors to buy natural gas commodities based solely on this ratio, under the belief that it would ultimately return to a historical level of 6:1 to 13:1, providing investors with a formidable profit. Now days we are witnessing that natural gas prices are getting underpinned and are expected to outperform crude oil so that the ratio will come again in its range.

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With keeping these fundamentals into consideration, investors can bet on this interesting commodity.

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OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,http://www.smctradeonline.com
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NATURAL GAS “getting ahead with confidence” Part 1

Scarcity is always good news for a commodity-based investment. But when it comes to natural gas, scarcitydoesn’t seem to be an issue these days. Natural gas prices have been extraordinarily volatile over the past 15 years, and the recent experience is no exception as, prices have gained sharply since August 2009. However, they are still less than half what they were in 2008.

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With an unpredicted surge in production, the natural gas price is getting cheaper and cheaper compared to oil. There are concerns among traders also that the market will be oversupplied in the short- to medium-term, with rig counts going up and industrial demand still struggling due to the weak economy. These factors translate into limited upside for natural gas-weighted companies and related support plays. But, the gap between supply and demand is expected to reverse in the coming months as natural gas producers bet on the improving U.S economy, the forecast of an active hurricane season and many other factors.

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However, natural gas might have more upside potential than downward potential for the following reasons:

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1. Rising Inventory Discourages Production

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Lower demand and higher production resulted in storage injections. U.S. Energy Information Administration data on 10th June, 2010 showed that domestic gas inventories rose by 99 billion cubic feet to 2.456 trillion cubic feet, a record high for this time of year and a level not normally reached until early July. Strong gains in storage have helped ease concerns about rebuilding stocks for next winter even if the summer turns out hot or Gulf Coast storms temporarily disrupt supplies. However, sustained low prices could reduce drilling activity over time. While the gas drilling rig count has fallen in five of the last seven weeks and raised expectations that U.S. production will slow later this year and tighten an oversupplied market, some traders worry that prices between $4.50 and $5 were still high enough to encourage more drilling. Gas prices might rise along with demand once production starts to decline.

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2. Increasing Usage for N.G

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Natural gas is an almost perfect energy source. Lower-priced natural gas will once again compete with coal for the electricity supply. Growing concerns about the environment also make it more attractive than coal. In addition, natural gas fired plants are much cheaper to build than nuclear plants. Gas now competes with diesel fuel for trucks and vans. In Asian countries, gas is being used by a growing number of regular cars. These benefits of natural gas over coal can also underpinned the prices in coming period.

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OUR Websites:  http://www.smcindiaonline.com,http://www.smccapitals.com,http://www.smctradeonline.com
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Weekly Update 7th – 11th June

Unlike developed economies market that closed in red, our market closed in the positive on the back of robust GDP growth of 7.4% in the year ending March 2010 driven by solid rebound in manufacturing activity.

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Auto & Cement sales numbers also joyed the markets. Good monsoon which is likely to be in range of 98% of the long term average will help in entailing inflation and will boost rural economy, a major factor for the overall growth of the economy kept the markets on a strong foot in the week gone by.

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On the contrary, bad news continued from the rest of the world. Export led recovery is losing momentum in Japan. Manufactures are planning to increase production at a slower pace in the coming months in view of the cut in European government expenditures that may damp sales of Japanese goods over time. Unemployment is increasing and job prospects are worsening together with cuts in household spending.

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Euorpean region economy which is struggling to gather strength after the debt crisis and has sought to cut expenditure got another jolt after Hungary said its economy is in a “very grave” situation, reigniting concern the region’s debt crisis is spreading. Hungary Prime Minister said that talk of a default is “not an exaggeration” because a previous administration “manipulated” figures.

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The country was bailed out with a 20 billion-euro ($24 billion) aid package from the European Union and International Monetary Fund in 2008. U.S. markets saw Indices dropping to four months low after the lower than forecast payroll numbers for the month of May. However the positive news in the payroll survey was in earnings, the workweek, and production hours. Wage inflation picked up with a 0.3 percent rise in May, following a 0.1 percent advance the month before.

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The average workweek for all workers edged up to 34.2 hours from 34.1 hours in April. The gain point out to future hirings and suggests increase in industrial production for the month.

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Overall trend of world stock markets is still down though the markets tried to take a recovery intra week but the US and European markets spoiled the party.

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Base metal commodities did not bounce even slightly which went to show that stock markets tried a recovery without participation of industrial commodities.

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Nifty faces resistance between 5150-5180 levels and Sensex between 17200-17400 levels.

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Sentiments are still very fragile and investors are very watchful in commodity.

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Technically, base metals and energy appear oversold; hence they may generate some lower level buying. However, one should not judge it as a major one sided rally in these commodities as fears on European economy is still hovering. Even, negative outcome of economic data’s from various economies is further indicating slowdown in economic activities. If mercury goes high further and we see further decline in crude and other inventories in US, then it will stimulate buying in crude oil. Natural gas has already seen good short covering in the prices in past few weeks, can witness more buying for the same reason.

INDIAN ECONOMY – GAINING STRENGTH Part 1

Stock market reflects & discounts the overall conditions in the economy.Besides, stock prices in the market are also governed by the investor behavior & valuations. Sometimes investor’s optimism takes the market valuation to a level that it does not matches up with the actual future growth, thus becoming the basis for correction & vice- versa. It is said that “ markets may remain irrational till the life of human being”. Now let us have a look at the economy to see what lies in the future & how it is shaping up for the next leg of growth.

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Indian economy is expected to grow by 7.2% in the fiscal ended on 31st march 2010 & is projected to expand by 8.55 in the current fiscal year and 9% in the next year. The continued improvement in the sentiments of the manufacturing sector which currently contributes around 15% in GDP is likely to play a major role in taking GDP growth to double digits.

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Strong industrial recovery has been the key underlying strength behind the recovery of GDP. During April- December 2009, the index of industrial production (IIP) increased by 8.6% over the corresponding period. Factors that will drive the growth in the industrial production are:

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  • Improvement in agriculture output- Tokyo-based Research institute for global change has predicted normal monsoon rains in india for the current year. On the belief of climatic conditions will remain normal during the year we expect the improved availability of agricultural output to push up production of manufactured food products..

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  • Rising consumer demand – as the business conditions are improving & corporate are giving wage hikes, we believe this will strengthen the sense of financial security in the minds of urban middle-class. A rise in purchasing power and availability of easy and affordable loans are expected to increase the demand for durable goods like auto, consumer appliances.

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  • More availability of mining products- we expect natural gas & crude oil output would increase as the result of the efforts that are being done by companies like Reliance & Cairn India. Coal Production will also rise owing to the allocation of new coal blocks by the government. Fertilizer & Electricity sector would be the key & direct beneficiary with the improvement in the gas & coal availability.

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    Stay tuned for more on this 🙂

    WEEKLY COMMENTARY 1st – 05th March

    Series of economic data amid Indian Union Budget resulted in erratic price movements in commodities throughout the week. Market participants indulged actively themselves in the market. Bullions cut some of their losses in the later part of the week on short covering.

    Expiry of February contract of base metals also made them very volatile. Most of them surrendered their previous gain on poor outcome of economic data.

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    Strong dollar together with the most recent signs that the U.S. economy is still struggling to recover, led bearishness in all base metals. On the date of expiry, lead closed down and the gap between lead and zinc  narrowed down to 90 paisa. Similar to base metals, even energy complex drifted lower on negative economic releases in the middle of strong dollar.

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    A stronger dollar makes oil and other commodities less affordable for holders of other currencies. On MCX, it touched the 3722 and moved down towards the level of 3600 on profit booking. Rising number of rigs coupled with rising mercury in Midwest cooled down natural gas prices further. On Friday, commodities recovered marginally on improved US GDP.

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    Bears were seen active in agro-commodities last week as most of the future contracts on NCDEX settled in red zone on weekly basis. Guar pack settled in red territory as weak domestic and export demand hammered maize prices on future bourses.

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    In oil seeds section, soyabean also ended the week with negative impression as the Indian market moved in line with weak overseas market. Continuation of subdued demand for soy meal from South East Asian countries and ample stocks of edible oil kept prices under check during the week.

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    Mustard seed futures traded range bound. Lack of demand and improvement in weather condition had a bearish impact on market in the week gone by.

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    In spices pack except turmeric futures all other futures settled in red zone. Pepper and jeera futures maintained their downtrend during the week taking cues from the higher fresh arrivals to the physical market. However turmeric futures ended the week on positive note supported by good export demand. Maize also traded in negative zone due to fresh crop arrivals and higher output estimates. According to latest government estimates the total output of current rabi season will be at 5.64 million tonnes over 5.61 million tonnes last year.