MorningShout

PakistanDailyNotes

Energy:2014Oilpriceoutlook;PPLisourpick

ArabLighttoaverageUS$102/bblin2014;stillariskofUS$50/bblWTI
WeexpectArabLightcrudeoilpricestodroptoanaverageof$102/bblin2014andtodipto
US$87/bbl at some point in the year. We also maintain our longheld view that the North
AmericancrudeoilmarketwillremainoversuppliedandexpectWTItoaverageUS$92/bblon
thebackofsurgingshaleoiloutput.Infact,WTIcouldfaceadditionaldownwardpressuresfrom
transportation, storage, refining and export bottlenecks next year, pushing the forward curve
furtherintocontango.

FY16
100.0

LT
97.0

Source:KASBResearch,BofAML

WhileWTIcrudeoilsoldoff,ArabLight
remainedresilient(US$/bbl)
125
120
115
110
105
100
95
90
85

Arablight

WTI

Dec13

80
Nov13

The Arab Light crude oil market has been remarkably resilient in the face of WTI and other
North American grades selling off hard. We hold a moderately negative stance on global oil
fromhereasthemarketismovingfromarelativelybalancedpositiontoaslightlyoversupplied
onein2014.Ineffect,theNorthAmericanshaleoilrevolutionismakingwavesacrosstheglobe.
TheprospectsforfurtherpricestrengthinArabLightmaybelimitedgivenabigreboundinnon
OPECoutputandimprovedprospectsforOPECsupplies.Weexpectthebalanceforlightsweet
barrelsintheAtlanticBasintograduallyshiftintosurplusin1H14,settingtheArabLightmarket
upforalowertradingrange.

FY15
102.0

Sep13

ArabLightstrengthsettoeasein2014

FY14
101.4

Aug13

StrongUSD,sluggishnominalGDPgrowthtocurbUS$oilprices
Almostbanginlinewith2011and2012,BrentcrudeoilpricesaveragedUS$109/bblin2013,
completingthemoststable3yearwindowforoilpricessincethebreakupofBrettonWoods.
Barring two brief supplydriven spikes towards US$120/bbl, prices were trapped in aUS$100
112/bbl range. For 2014, we hold a moderately negative stance on global oil prices as the
market is moving from a relatively balanced position to a slightly oversupplied one due to
increasedoutputfromnonOPECandIran.Againstthat,BofAMLeconomistsprojectmodestly
higher global GDP growth in 2014 at 3.5%, but continued disinflation in developed markets
(DMs)andminimalinflationarypressuresinemergingmarkets(Ems).Thiscombinationshould
setBrentupforaslightlylowertradingrange.

ArabLight

Jul13

May13

ArabLightCrudeOilForecast(US$/bbl)

Apr13

6January2014

HussainYasar
Hussain.yasar@kasb.com
KASBSecuritiesLimited
+9221111222000

Feb13

In 2014, we see sluggish nominal global GDP growth and a stronger USD as
majorconstrainingfactorsonUSDdenominatedoilprices.
We hold a moderately negative stance on global oil for 2014 as the market
movesfrombeingrelativelybalancedtoslightlyoversupplied.
FurtherpricestrengthinArabLightcrudeoilmaybelimitedgivenabigrebound
innonOPECoutput,improvedprospectsforOPECsuppliesandnoacceleration
inglobaloildemandgrowth.WeseeArabLightpricesaveragingUS$102/bblin
2014,evendippingtoUS$87/bblatsomepoint.
Beyond2014,weseelessofastructuraloilmarketdeficitonsofterEMactivity
and a rise in nonconventional oil supply. We see growing risk that Arab Light
movesdownstructurallytoaUS$90100/bblrange.
WemaintainourBuyratingforbothPPLandOGDC,wherePPLisourtoppick
for the sector. Pak E&Ps are currently trading at 45% discount to the regional
peersgroup2014EP/E.

Jan13

BRENT

Source:Bloomberg,KASBResearch

Globaloildemandgrowsattrendin2013
Globaloildemandlikelyexpandedatarateof1.1mnbpdin2013,roughlyinlinewithlongterm
trends, with improvements in demand recently shifting to the OECD. The recovery in the US
economy has gained pace, supporting demand for industrial fuels like diesel or naphtha. The
firmermacroeconomicpictureinEurope,wheremostcountriesnowexitedtherecession,has
also created some positive momentum for oil demand. After sharp declines of 400800 kbpd
Refertoimportantdisclosuresonpage3

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morningshout
YoYin2H12and1Q13,oildemandinEuropestartedtostabilizemidyearandisnowoscillating
betweencontractionandgrowth.

KSE100IntradayMovement
26,135

High26,136

PPLisourtoppick,butwereiterateBuyonOGDCaswell
PPLisourtoppickinPakE&Psbasedon(1)PPLsbalancedexplorationprogram;(2)reserves
upgrade(3)healthyearninggrowthof20%overFY1416E,and(4)anundemandingvaluations.
We also like OGDC due to (1) OGDCs position to provide leveraged exposure to Pakistans
attractiveexplorationpotential,(2)healthyappraisalupside,(3)productionCAGRof14%over
FY1416E, (4) Reserve upgrades, and (5) an undemanding valuations. Pak E&Ps are currently
tradingat45%discounttotheregionalpeersgroup2014EP/E.
.

26,100

MorningNews

25,960

` FFCraisesureapricesbyPRs155/bagtoPRs1875/bag(Dawn)
Asperthemediareports,FFCraisedureapricesbyPRs155/bagtoPRs1875/baginresponseto
increaseinGIDConfeedstockgasbyPRs103/mmbtuandfuelgasbyPRs50/mmbtuannounced
bythegovtlastweek.TheincreaseinureapricesdonebyFFCisPRs23/baglowerthanthehike
announcedbyEngrolastweek,whichmayeventuallyforceEngrotomatchFFCspricesgoing
forward.FurtherincreaseingaspricesthismonthviaanotificationtobeissuedbyOGRAand
70centsgaspricingapprovalforEngrowouldbethekeytriggerstowatchoutfor,whichclarify
theoutlookforureamarginsinthecurrentyear.

TechnicalView
AhmedHanif
ahmed.hanif@kasb.com

KSE100:Allindicatorsareshowingbullishnesstill26,900

26,030
25,995
Low25,968
9:15AM

KSE30
KSE100
KSEAll
Share
DGKC
PSO
PTC
PPL
ENGRO

2:45PM

Close
%Chg
19,355.40
0.2%
26,046.71
0.3%
19,280.61
92.72
338.01
30.15
219.15
162.77

0.5%
2.7%
0.5%
1.4%
0.5%
0.5%

4:15PM

Vol.
US$mn
58.51
81.43
92.98
10.84
8.14
6.18
6.00
5.07

Source:KSE

KSE100:TopGainers&Losers
TRG

Theinitialtargetof26,500fortheindexisstillintactbutthebullishtrendlineisnowat26,900
and it has been going up by 50100 points session by session which is increasing our index
targets.

PAKT
MUREB

Moreover, the upper band of Bollinger Bands in the monthly chart is also at 26,900 which
match with the trend line resistance, thus, increasing the probability of the index to target
26,900points.

THALL

Some stocks in the cement sector (DGKC, FCCL and MLC F) looks attractive at current levels
whereasoil&gassector(OGDC,PPLandPSO)alsolooksstrong.

AGL

PSEL

JSBL
ANL

10:45AM

Source:KSE

IndexData&VolumeLeaders

The index breached its psychological level of 26,000 and gave a daily and a weekly closing
abovethatlevelwhichisabullishsign.

Itisrecommendedtoaccumulatepositionsintheabovementionedstocks.

26,065

PCAL
SHFA
5%

0%

5%

10%

Source:KSE

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morningshout
WorldMarketsandCommodityPrices
InternationalEquityMarkets

EuropeanMarkets(LastTradingSessionsRates) *
Price Abs.Chg.
%Chg.

AsianMarkets(ClosingRates)
Price
AllOrdinaries
ShanghaiComposite
HangSeng
BSE30
JakartaComposite
KLSEComposite
Nikkei225
NZSE50
StraitsTimes
SeoulComposite
TaiwanWeighted
KSE100Index
Source:Bloomberg

Abs.Chg.

5,351.80
2,083.14
22,817.28
20,851.33
4,257.66
1,834.74
16,291.31
4,769.04
3,131.47
1,946.14
8,546.54
26,046.71

18.0
26.3
522.8
37.0
69.6
18.2
0.0
32.0
43.2
21.1
66.0
84.5

0.34
1.24
2.24
0.18
1.61
0.98
0.00
0.68
1.36
1.07
0.77
0.33

(0.5)
117.4
(11.1)
n.a
(5.8)
20.5
(84.1)
14.3
1.0

2,533.77
2,880.45
4,227.28
9,400.04
399.82
8,229.00
6,717.90

12.8
43.4
68.7
152.1
2.0
26.0
31.2

0.50
1.48
1.60
1.59
0.49
0.32
0.46

16,469.99
4,131.91
3,538.73
1,831.37

28.6
11.2
24.8
0.6

0.17
0.27
0.70
0.03

AmericanMarkets
DowJonesInd.Average
NASDAQComposite
NASDAQ100
S&P500Index,RTH

ForeignPortfolioInvestmentinEquities
Country
Day(US$mn) WTD(US$mn)
Pakistan
India
Indonesia
Japan
Philippines
SouthKorea
Taiwan
Thailand
Vietnam

ATX
BEL20
CAC40
DAX
AEXGeneral
SwissMarket
FTSE100

%Chg.

MTD(US$mn)

(6.8)
183.7
72.7
8,052.8
3.1
20.5
452.9
18.1
9.8

YTD(US$mn)

(2.9)
118.6
15.1
15,160.0
3.1
(543.9)
1.8
18.1
2.6

YoYYTD(chg)

(2.9)
118.6
15.1
149,920.0
3.1
(543.9)
1.8
18.1
2.6

Date

5.1%
82.3%
88.3%
497.2%
94.4%
277.8%
95.7%
85.9%
82.0%

0301
0201
0301
2012
0301
0301
0301
0301
0301

Source:Bloomberg,NCCPL

ForexandMoneyMarketsnapshot
6MonthKIBOR(Offer)
12MTBill(Average)
10yearPIB(Average)
PkR/US$
Source:KASBMoneyMarket

Current

Previous

Chg.

10.11
10.13
12.53
105.37

10.11
10.13
12.58
105.59

0.00
0.00
0.05
0.22

CommodityPrices
Price
WTI(CrudeOil)
Gold
CRBIndex
Source:Bloomberg

93.96
1,237.01
276.53

Abs.Chg.

%Chg.

1.5
12.6
0.9

1.6
1.0
0.3

KASBSecuritiesLimited,5thFloor,TradeCentre,I.I.ChundrigarRoad,Karachi
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