>CRUDE OIL (MORGAN STANLEY)

Crude Oil : Bullish or Bearish?

• Bearish Indicators
>High Inventory levels
>Spare Capacity on the rise as OPEC cuts production

• Bullish Economic Indicators
>Upward GDP Revisions
>US ISM Data and China’s PMI Index
>Increased Crude Oil Import by China

• Oil regaining its Negative Co-relation to the depreciating dollar

• Future supply concerns keep us bullish in longer term; however we are bearish in the shorter term

• Most Asian equities discounting $65-US$75/bbl

• Asian Plays on Crude Oil: Cairn India, Australian E&Ps and CNOOC

• Asian Negative Plays on Crude Oil: HPCL, BPCL, IOCL and Sinopec

Asian E&P Stocks: Leveraged to Crude Prices

COMMENTS

• High correlation in long term – E&P stocks exhibit a higher correlation with WTI prices in the long term.

• In the recent past, Oil has again started its negative co-relation to the depreciating dollar.

• Australian stocks and Cairn India are not only highly correlated in the long term, but also are most sensitive to change in oil prices.

• Indian State refiners have a negative correlation with crude oil prices due to negative marketing margins on selling of MS, HSD, LPG and Kerosene.

To see full report: CRUDE OIL