Crude oil has hit a fresh one-year high. Prices can touch $90 per barrel from here on. Demand from emerging Asia is already strong; and demand from rich countries should start to pick up in the first quarter of 2010. Capacity expansion could create tightness in supply with refinery capacity increasing rapidly. The weak US dollar should also support higher prices. Between 7 October 2009 and 14 October 2009 crude has gained 12% closing the day at $78 per barrel. According to the American Petroleum Institute, US crude oil stockpile fell 172,000 barrels to 339.20 million barrels in the week ended 9 October 2009.

Spice exports from India fell 10% between April 2009-August 2009. The country’s export earning has slipped 9% to $429.68 million from $546 million a year ago. However, in August 2009, exports rose 3.5%.

Indias cotton exports in the 2008-2009 season which ended in September 2009, are estimated to have plunged a massive 55% to about 38 lakh bales due to higher prices in the domestic market. The country had exported 85 lakh bales in the 2007-2008 season. In October 2008, the Cotton Advisory Board had estimated cotton exports to be at 75 lakh bales during 2008-2009. Last year, the government had raised the minimum support price (MSP) by 50%. The MSP has not been hiked for the 2009-2010 season. India is now left with over 71 lakh bales of carry-over stock for the 2009-2010 season.

According to the Solvent Extractors Association of India (SEA), during the season ending September 2009, Indias crude soya oil import is estimated to have surged by 40%, to over one million tonnes, against 731,000 tonnes last season. The government has allowed crude soya oil import at zero duty and refined variety which attracts 7.5% duty.

Coking Coal
According to a report by Citi Investment Research and Analysis, a division of Citigroup Global Markets Inc, global prices of coking coal, which are floating around $160-$170 a tonne, are expected to harden further and reach $200 a tonne in 2010-2011, thanks to higher coking coal imports by China.

In the Moneylife issue dated 24 September 2009, we had written about crude oil to natural gas ratio hitting its highest level indicating that oil is vastly expensive relative to natural gas. The conclusion was that either natural gas would go up sharply or oil would fall. Since then, natural gas has shot up 62%, while oil has been weak. Natural gas prices surged mainly because gas supply was expected to be in line with demand, resulting from the brisk pullback in US drilling activity. The number of rigs drilling for natural gas in the US has decreased 56% since last year.