Tuesday, November 14, 2006
A decade after the company went public, Marico Industries has grown into a global beauty and wellness company, a total make over from the oil manufacturer it was known to be. The journey from a commodity trader to a brand creator has been focussed and amidst cut-throat competition from multinational companies in the FMCG sector. In fact the management at Marico has itself been going the multinational way. It recently acquired the haircare and skincare businesses of the Egypt-based brand, Fiancee. This is Marico's fifth acquisition in 18 months across various product categories, including acquisition of Nihar Oil from Hindustan Lever. Currently, Marico derives 10% of its total revenues from the international market through its subsidiaries.
Not just oil
These moves have been a concerted effort by the management to move off from total dependence on Parachute for its revenues. A decade ago, Parachute accounted for more than half of the company's revenues. The share is now around 38% of total domestic revenues.
The management has extended the Parachute brand to the higher end of the Rs 7,500-crore branded oil market. With the acquisition of Nihar, the dominance in this market is total, with around 60% of the market share. The company has met with strong success on the test launch of Parachute Therapie, a hair-loss oil meant for the upmarket user. Analysts expect the hair oil market to grow by around 15% in the next three years and the company will be ready to make the most of the growth in this segment, backed by a strong blend of traditional strengths and innovative product offerings.
Tradition and innovation
The base for this blend is the distribution network that the company has painstakingly built over the years. Marico can boast of 1.6 million retail outlets and reaches out to 1.8 million households. This network covers almost every Indian town with a population of over 20,000. Its parallel rural sales and distribution network ranks among the top three in the industry. On the innovation front, Marico has been a consistent performer. This can be substantiated by the fact that new products have consistently contributed around 12-18% to its revenues in the last five years.
Aspects of product innovation can also be seen in the Rs 3,500-crore edible oils market, where it has created multiple extensions and blends. The Saffolla brand now has several blends apart from the traditional sunflower oil offering. Marico has also launched an additive Saffola Atta Mix that lowers cholesterol when added to normal dough.
Kaya, a speciality clinic that offers skin care solutions and personalised service, is another strong innovation that currently accounts for around 6% of the company's revenues. Analysts reckon that the Kaya clinics are all set to break even in the second half of this year.
Branding and beyond
The company has been backing its revenues by strong brand-building spending through advertisements and promotions. In FY2006, advertising spends accounted for around 13% of sales. This trend is expected to continue as the company focuses on sending out a strong brand message to the masses.
From an investors point of view there are exciting times ahead. They will however have to look at several factors that could dull this excitement. Analysts believe that the cost of acquisition of brands will have to be monitored carefully as the management could pay a high price. Kopra price rise, the key raw material, could also affect the bottomline. After a considerable run-up on the price, analysts expect Marico to keep enchanting the market with a steady performance.
Market opened positive on the back of positive global cues. Heavy profit booking saw the index slip in the negative territory but buying in technology stocks helped the index back into positive to close there. Markets were volatile mood through out the day. Heavyweights like TCS, Infosys and ONGC aided the rise in the index. Auto, Pharma and Engineering stocks were out of favor. Selling was seen in Mid cap as well as Small cap. Asian markets ended positive while the European indices were trading in red.
Sensex closed up by 26 points at 13425.5. It was helped up by gains in TCS (1106.25,+3 percent), Infosys (2209.75,+2 percent), ICICI Bk (857.45,+2 percent), Satyam (431.5,+1 percent) and ONGC (880.2,+1 percent). Restricting the gains are HLL (247.95,-2 percent), NTPC (135.4,-2 percent), Hindalco (178.6,-2 percent), TISCO (490.95,-1 percent) and Grasim (2673.6001,-1 percent).
The Pune based Finolex group is eyeing presence in the Rs 50,000-crore domestic insurance industry. Investment would be about Rs 1,000 crore spread across 8-10 years. The PP Chabbria-promoted group has Finolex Industries and Finolex Cables under its fold. While Finolex Industries is an integrated petrochemicals player, Finolex Cables makes products for the telecom sector. There are currently 15 players in the Indian insurance industry. Indian insurance sector recently witnessed the entry of Bharti and Anil Ambani?s reliance ADAG. Other players like the Kirloskars and Bharat Forge have also reportedly expressed interest in insurance. Foreign equity stake in domestic insurance companies is capped at 26%. India?s insurance market is estimated to grow at an annual rate of 15% to 20%. Only 20% of the total insurable population of India is covered by life insurance. Sins are done only in bullish times and that?s exactly what we are seeing in terms of unrelated diversifications. It adds to the risk but bullish markets tend gives this a thumbs up encouraging promoters to take higher risks. Insurance as a business is still maturing and players such as ICICI Prudential, HDFC Standard Life, Birla Sunlife, Bajaj Allianz have been doing fairly ok. Finolex Industry closed marginally up.
The Television Eighteen (TV 18) Group has acquired the assets and staff of Crisil MarketWire (CMW) from rating agency Crisil. The transfer will be effective January 1, 2007. The move follows the earlier decision of TVI8 and Crisil to jointly develop a framework for business collaboration. The CMW business will be rechristened as NewsWire18 and will be a group company of the TV 18 Group. This transaction and the news and data platform will help TV18 serve the institutional segment. The stock closed down 6.5% on profit taking. Certainly there were some who knew about this coming. Crisil closed up.
Technically Speaking: Market was in volatile mood as it started positive then slid in the negative territory and then rallied back to end in green. Volumes were good at 5139 cr. However, the breadth has been in favor of Decliners as they were 1.75 times the Advances. The Resistance was at 13535 - 13477 while Support at 13371 -13323 levels.
Performance was superb through out the day. DTP sell calls on Siemens, Dr. Reddy and Nifty Fut hit the target while call on Reliance dissapointed. A quickies call on Emkay Shares which was booked partially was closed as it hit the revised stoploss but overall decent gains made.
Tax credit of Rs8mn in the quarter as against a tax payout of Rs33mn last year led to a 8.9% yoy increase in net profit to Rs91mn while for the full year PAT increased by 66.1% yoy to Rs556mn
* Net sales increase by 9.1% yoy.
* Operating margin declines by 30bps yoy as other expenditure surges by 720bps yoy
* Pre tax profit declines by 24.9% yoy on the back of higher operating and interest costs.
* For Q4 F9/06, net sales increased by 9.1% yoy to Rs2,390mn while for the full year ended September 30, sales increased by 25.4% yoy to Rs8,016mn.
* Shree Renuka Sugars (SRS) crushed about 1.75MMT of cane in 2005-06 and produced about 0.2MMT of sugar at an average recovery of about 11.24%.
* Average cane price paid to farmers in the 2005-06 season was about Rs1,200/MT.
* Sugar realizations for F9/06 were above Rs16,000/MT, an increase of about 5% yoy.
* Sugar inventory as of September 2006 was about 22,000MT (including re-export obligations).
* Operating margin shrunk by about 30bps to 7.1% as compared to same period last year mainly on account of higher ‘Other expenditure’ which surged by 720bps yoy.
* Interest cost increased by 88.3% to Rs63mn as borrowings increased to fund expansion plans in different segments.
* Although pre tax profits for Q4 F9/06 declined by 24.9% yoy, a tax credit of Rs8mn in the quarter as against a tax payout of Rs33mn last year led to a 8.9% yoy increase in net profit to Rs91mn while for the full year PAT increased by 66.1% yoy to Rs556mn translating into an EPS of Rs23.3 for F9/06.
* The company would expand its crushing capacity to 25,250TCD in the current sugar season while co-gen capacity would be about 103MW of which approximately 60MW would be surplus power exported to the grid.
* It expects crushing operations in the 2006-07 season to last for more than 200 days with recovery rates of about 11.5% while co-gen plants would be operational for about 270 days.
* With domestic sugar prices expected to remain flat on account of buoyant sugar production of about 22mn tons in 2006-07, growth would mostly accrue from volume expansions in sugar and from by-products like ethanol and co-gen power.
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Cluster: Ugly Duckling
Price target: Rs720
Current market price: Rs628
A pact with Celestica
HCL Technologies (HCLT) has entered into an agreement with Celestica Inc. to form a joint venture that would offer complete concept-to-manufacture solutions to original equipment manufacturers (OEMs) globally. Celestica is one of the leading electronic manufacturing service (EMS) companies globally and also has expertise in supply chain management. The idea behind the joint venture is to leverage Celestica's strengths (in manufacturing and supply chain management) jointly with HCLT's capabilities in the engineering service space (that includes product design services) to provide an innovative offering (end-to-end solution) to the OEMs globally.
The market remained unbeaten for the fourth straight day as buying continued unabated. The high turnover on BSE, which was more than Rs 5,000 crore, was the salient feature of trading today.
The BSE Sensex gained 26.50 points (0.20%), to end at 13,425.50, a lifetime closing high. The Sensex had surged to an all-time high of 13,486.74 in opening trade, its low being 13,380.77, even while oscillating 106 points for the day.
The S&P CNX nifty rose 7.15 points (0.19%), to finish at 3,865.90, also a lifetime closing high.
The market-breadth turned negative due to profit-booking in small-cap and mid-cap counters. Against 1,625 shares that declined, only 929 advanced. As many as 65 scrips remained unchanged. The BSE Mid-Cap Index was down 0.76%, while the BSE Small-Cap Index lost 0.91%.
The total turnover on BSE beat Monday’s turnover of Rs 3,943 crore, as investors bet long on frontline IT pivotals, and shares worth Rs 5,139 crore changed hands. A huge block deal in TCS accounted for almost 18.65% (Rs 957.36 crore) of today's turnover. Obviously, TCS was the top-traded counter on BSE.
Among the 30-Sensex pack, 18 declined while the rest advanced.
IT major TCS was thre top gainer, up 2.97% to Rs 1,106.50 on a total volume of 88.92 lakh shares, after block deals for a total of 85.05 lakh shares were executed in the scrip on BSE, at an average price of Rs 1,075.50 in early trade. This constitutes 0.8% of the equity capital of Rs 97.86 crore (face value Re 1 per share). Citigroup Asia has purchased this stake from the promoters, who hold 84% in the company. TCS has also won a $100 million contract in the US.
Infosys advanced 2.32% to Rs 2,211 on 5.13 lakh shares. The stock had surged to a lifetime high of Rs 2,225. On Monday, the Infy ADR had surged 3% to $55.17.
The excitement in Infosys also translated into gains for other IT scrips. Satyam Computers (up 1.30% to Rs 431.10) and Wipro (up 0.93% to Rs 547) shifted to higher terrain. Satyam Computer Services ADR rose 3.29% to $22.61, while Wipro’s ADR added 1.89% to finish at $14.56 on NYSE.
A block deal of 5.43 lakh shares was struck in Mphasis BFL, at Rs 242.95 per share by 10:13 IST. It rose 2.66% for the day, to Rs 247.25 on a cumulative volume of 10.75 lakh shares.
ICICI Bank gained 2% to Rs 857.45, extending its recent surge, after striking a lifetime high of Rs 861. The stock is trading at record levels on expectations that earnings growth will last. Renewed buying has lifted the scrip 10.8%, from Rs 767.75 on 6 November 2006.
PSU power generation company NTPC was the top loser, down 2.14% to Rs 135, on 9.33 lakh shares.
FMCG major HLL lost 2.05% to Rs 247.50 on 5.96 lakh shares. It traded in a range of Rs 245.05 – Rs 254.
Dr Reddy’s Lab (DRL) lost 0.74% to Rs 789.20, after the company on Monday applied to US regulators to sell 13.5 million ADRs. As per reports, DRL has filed for $ 235 million ADS issue with the US Securities and Exchange Commission. This is DRL's second ADS issue on the NYSE. DRL ADS issue will lead to equity dilution of 8.8% and the company will have 20.8% paid-up equity listed on the NYSE. Dr Reddy’s will use the proceeds to repay the long-term debt from Betapharm's acquisition.
Index heavyweight Reliance Industries (RIL) recovered slightly from the day’s low of Rs 1,273 and finished with a loss of 0.83%, at Rs 1,276.10. As many as 6.12 lakh shares had been transacted in the counter. Reports point to Reliance Retail considering a tie-up with Nestle India. RIL has also applied for three coal blocks to implement underground coal gasification project.
While the market was trading strong, metal producers tumbled under selling pressure. A sharp decline in metal prices on the London Metal Exchange (LME) triggered the fall. The BSE Metal index was the top loser among sectoral indices, down 119.64 points (1.32%), at 8,978.43.
Hindustan Zinc was the chief loser among metal shares, down 4.87% to Rs 861.25 on 12.98 lakh shares. Sterlite Industries (down 0.91% to Rs 534), Hindalco (down 1.87% to Rs 178.50), Tata Steel (down 1.39% to Rs 490.25), SAIL (down 2.05% to Rs 84), and Hindustan Copper (down 2.77% to Rs 86) declined.
Refinery shares edged higher as oil price declined for the second day in a row on Monday. BPCL gained 1.07% to Rs 367.20 and HPCL added 2.42% to Rs 306.50 as crude oil prices stabilised, below $ 60 per barrel.
Chemicals and pesticides maker United Phosphorus surged 5.25% to Rs 306.65. Media reports speculate that it will buy a crop protection firm in western Europe for "slightly higher" than 100 million euros.
PBA Infrastructure jumped 7.37% to Rs 142.80, after it bagged two contracts worth Rs 101.12 crore from Jammu & Kashmir Economic Reconstruction Agency.
Real estate developer Unitech jumped 5% to Rs 447.20, extending its recent surge with pending buy orders for 4.16 lakh shares at the 5% upper limit in the scrip on BSE. A strong response to the recent IPO of real estate development major Parsvnath Developers, has in turn lifted the Unitech scrip. Parsvnath's IPO was subscribed over 60 times, with FIIs making a beeline for the IPO. The issue was closed on 10 November 2006.
Glenmark Pharma rose 3.46% to Rs 507.30, on reports that the new drug policy will extend tax benefits on R&D till 2015.
UTI Bank jumped 5.35% to Rs 475.70, after the company said on Monday it plans to raise Rs 200 crore through upper tier II unsecured redeemable subordinated debentures. The scrip had surged to a lifetime high of Rs 477.45.
Tulip IT Services lost 1.91% to Rs 379, after it contradicted media claims about winning a large order worth Rs 102 crore IT project from Haryana government.
FDC spurted 4% to Rs 41.50, on signing an exclusive development and supply agreement with Akorn Inc, for two ophthalmic drugs. Under the agreement, Akron will get 40%, while FDC will get 60% of the gross profit generated from the sales of the two products, which, currently, have a combined US market size of about $ 170 million.
The Nikkei share average rose for the first time in five sessions, gaining 1.67% after stronger-than-expected gross domestic product data sparked a rebound in Sumitomo Mitsui Financial Group and other firms sensitive to domestic demand. Japan's economy expanded 0.5% in the three months to September compared with the preceding quarter, beating market expectations of 0.2% growth in price-adjusted terms. The Nikkei 225 index settled up 267.06 points, at 16,289.55.
Hang Seng index ended up marginally 9.88 points (0.05%), at 18,878.42.
FII-inflows remain strong. By the first few days of November 2006, FII inflow stand at Rs 2,816 crore (till 10 November). In October 2006, when the earnings poured in, their net inflow totaled Rs 8,013 crore compared to an inflow of Rs 4,643 crore in August and Rs 5,428 crore in September. FII-inflow in calendar 2006 stands at $7.3 billion. In calendar 2005, FII inflow was a record $ 10.7 billion.
Net foreign investment in Indian equities has topped $7 billion this year, helping the BSE index gain over 15% since the start of September and more than 43% so far this calendar year, making it the best-performing index in Asia-Pacific.
FIIs had purchased net equities worth $ 103.7 million on 10 November, while mutual funds purchased to the tune of Rs 129.87 crore on 10 November 2006.
The US stock markets closed higher on Monday. Nasdaq gained 16.66 points, or 0.70%, to 2,406.38. It opened at 2,388.93 and touched a high of 2,408.91 during the day. The Dow Jones Industrial Average rose 23.45 points, or 0.19%, to 12,131.88, after reaching an intra-day high of 12,164.70. Out of the 30 components of the Dow, 20 finished higher and 10 ended lower.
he market witnessed substantial volatility for a major portion of the trading session, but held firm above the 13400 level as global indices created a perfect platform for the bulls to pursue buying. The Sensex resumed 41 points higher at 13440 and advanced further on substantial buying support. Buying in heavyweight, tech and banking stocks propelled the index to a new intra-day high of 13487 in the afternoon. However, the market slipped twice in the afternoon on the weakness in select heavyweight, FMCG, metal and consumer durables stocks, which dragged the index to an intra-day low of 13381. The Sensex finally wrapped up the session with gains of 26 points at 13425, while the Nifty added seven points to close at 3866.
The market breadth was negative, with the losers outpacing the gainers in the ratio of 1:0.58. Of the 2,613 stocks traded on the BSE, 933 stocks advanced, 1,619 stocks declined and 65 stocks ended unchanged. Among the sectoral indices the BSE IT index was the major gainer and soared 1.87% at 4986 followed by the BSE TECk index (up 1.04% at 3415) and the BSE Bankex (up 1.03% at 6864).
Among the front-line stocks TCS was the major gainer and was up 2.95% at Rs1,106. Infosys soared 2.26% at 2,210, ICICI Bank gained 2.01% at Rs857, Satyam surged 1.39% at Rs432, ONGC advanced 1.04% at Rs880 and Ranbaxy was up 1.04% at Rs402. Bharti Airtel, L&T, HDFC Bank Wipro and Bajaj Auto also ended in positive territory. However, HLL lost ground and tumbled 1.86% at Rs248, while NTPC shed 1.85% at Rs135. Hindalco was down 1.81% at Rs179. Grasim, ACC, Gujarat Ambuja, Maruti, Hero Honda, BHEL and Reliance Communication shed over 1% each. Cipla, SBI, ITC, RIL, Tata Motors, Dr Reddy's, HDFC and REL also ended the day in negative territory.
Over 1.01 crore Silverline Technologies shares changed hands on the BSE followed by TCS (88.93 lakh shares), Development Credit Bank (69.95 lakh shares), Nandan Exim (67.03 lakh shares) and GTL Infrastructure (51.89 lakh shares).
Value-wise TCS registered a turnover of Rs943.40 crore on the BSE followed by Indiabulls (Rs209.29 crore), Glenmark Pharma (Rs116.01 crore), Hindustan Zinc (Rs113.96 crore) and Infosys (Rs113.48 crore).
Despite the US federal budget deficit widening in October to $49.3 billion from $47.3 billion a year ago, bullion continued to fall. Japan's Q3 gross domestic product (GDP) at 2% against an expectation of 1% has triggered talks of a rate hike. There was hardly any news impacting the precious metals, but the weaker base metals induced selling pressure in gold
Chemicals and pesticides maker United Phosphorus Ltd.
He declined to give the name of the firm but said Yes Bank
The benchmark indices, Sensex and Nifty, are expected to commence on a firm note and witness significant rally during intra-day trades, as international markets backed by firm US and Asian indices may help the sentiment remain buoyant. Among the Asian majors, Nikkei has surged 1.70% at 16293 while Jakarta Composite has scaled up to 1.39% at 1662. Also crude oil slipping in the global markets may augur well for the domestic oil stocks. On the technical front, the Nifty could test at 3875 on the upside and has supports in the 3820-3800 range, while the Sensex has a likely support at 13330 and may face resistance at 13500.
U.S. stocks ended on positive note on Monday as investors bet that falling crude oil prices would support corporate earnings growth, with the Dow Jones adding 23 points to close at 12132, while the Nasdaq added 17 points at 2406, closing at its highest point since February 2001.
Barring few all the Indian floats had a decent outing on the US bourses. Satyam and Infosys were the biggest gainers and rose over 3% each while Wipro scaled up 1.89%, ICICI Bank and Patni Computers jumped over 1% each. Tata Motors, HDFC Bank, and Dr Reddy's ended with steady gains. However VSNL lost ground and was down by 2% followed by MTNL down by 1%. Rediff also ended the day with steady losses.
Crude oil prices in the US market fell sharply, with the Nymex Light Crude oil for December delivery falling $1.01 to close at $58.58 a barrel. In the Commodity space, the Comex gold for December series dropped $4.30 to settle at $625.80 an ounce.
On Nov 10 2006, FIIs were net buyers of stocks to the tune of Rs 478.10 crore (purchases worth Rs2661.60 crore and sales of Rs2183.50 crore) while domestic mutual funds were net buyers of stocks to the tune of Rs129.87 crore (purchases worth Rs647.41 crore and sales of Rs517.54 crore).
The market sentiment holds firm due to strong FII inflow and robust Q2 results. Firm Asian markets and cheaper oil price may boost domestic bourses further today. Strong FII inflow and revision in earnings estimates by brokerages for companies following strong Q2 results has fuelled renewed surge on the bourses - Sensex has gained 261.51 points in the past two trading sessions to a lifetime closing high of 13,399 on Monday (13 November).
Asian markets edged higher on Tuesday (14 November). Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.2% to 1.6%.
US stocks advanced on Monday as investors bet that falling crude oil prices would support corporate earnings growth, pushing up shares of industrial bellwethers such as General Electric Co. But nervousness about this week's inflation reports, which could determine the course of interest rates, curbed a broader market advance. The Dow Jones industrial average rose 23.45 points, or 0.19 percent, to close at 12,131.88. The Standard & Poor's 500 Index edged up 3.52 points, or 0.25 percent, to finish at 1,384.42. The Nasdaq Composite Index ended up 16.66 points, or 0.70 percent, at 2,406.38.
US crude oil for December delivery extended Friday's 2.6 percent drop on expectations that mild US Northeast weather would slow heating demand. It ended down $1.01 at $58.58 a barrel on the New York Mercantile Exchange on Monday.
With expectations that the momentum of earnings growth would be sustained, FIIs have stepped up buying of Indian equities. Strong global liquidity has aided the surge in inflows. Buying is happening from new FIIs entering the Indian markets. By the first few days of November 2006, FII inflow has reached Rs 2816 crore (till 10 November). In the month of October 2006, when the earnings poured in, their net inflow totaled Rs 8013 crore compared to an inflow of Rs 4643 crore in August and Rs 5428 crore in September. FII-inflow in calendar 2006 so far has reached $7.3 billion. In calendar 2005, FII inflow was a record $ 10.7 billion.
A section of the market attributes the solid surge on the Indian bourses to increasing recognition of India’s long-term growth prospects. From 4,644 on 23 June 2004, it has galloped 188.5% in less than two and a half years.
The open interest in the derivatives segment is on the rise and it may trigger short-term volatility on the bourses.
Japan stocks led Asian markets higher on Tuesday after data showed the world's second-biggest economy growing faster than expected, while oil prices steadied below $59 a barrel after another fall.
The growth figures boosted the yen and sent Japanese bond yields sharply higher as investors priced in an increased risk that the Bank of Japan will raise interest rates in the next few months.
Japan's economy expanded 0.5 percent in the September quarter for an annualised growth rate of 2.0 percent, double market expectations, providing some relief after weaker-than-expected machinery order data last week.
"From these figures, we can say that the underlying trend of the economy remains bullish," said Takeshi Minami, chief economist at Norinchukin Research Institute.
By the end of the morning session, Tokyo's Nikkei average <.N225> had climbed 1.69 percent, picking up after two straight sessions of declines when investors were worrying that economic growth was faltering.
TECHS FIND FAVOUR
Among early Japanese gainers were domestic plays such as banks and property shares.
Number-two banking group Mizuho Financial Group <8411.t> jumped nearly 4 percent, while property firm Mitsubishi Estate Co. Ltd. <8802.t> gained 3.6 percent.
Spurred by positive broker comments for technology sector bellwether Intel Corp.
Advantest rose 3.45 percent, while Samsung Electronics, which on Monday forecast very strong demand for computer memory chips in the first quarter of 2007, added 1.41 percent.
Australia's Macquarie Bank
The MSCI index of Asian stocks outside Japan <.MSCIAPJ> advanced 0.59 percent by 0227 GMT, nearing a six-month high of 369.65 set a week ago.
South Korea's key KOSPI <.KS11> rose as much as 0.65 percent to a session peak of 1,405.79 -- its highest intraday level since May 16.
"This could be the beginning of an early 'Santa Claus' rally," said Cho Seong-joon, an analyst at Meritz Securities. "Japan's economy was stronger than expected, and that was a nice surprise."
Backed by a stronger-than-expected economy, the yen rallied against the dollar and the euro.
The dollar bought 117.67 yen
Analysts said the strong growth data has kept alive the chance of a second interest rate increase this year, although most market players are still betting on a move early next year.
The yield on the Japanese 10-year bond
Benchmark U.S. crude
The contract had been trading above $61 on Thursday.
Doubts that OPEC would deliver on its agreed crude production cut also weighed on oil prices.
"There are growing concerns about the lack of OPEC compliance," said Bill O'Grady, analyst at A.G. Edwards. "If OPEC isn't cutting back as much as it says it is, it will be hard for prices to stay afloat."