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Thursday, January 29, 2009

Crude pares early losses

Prices surge by more than 4%

Crude prices ultimately ended higher on Wednesday, 28 January, 2009 after dropping earlier during the day. Prices went lower after weekly inventory report showed build up in crude inventories for fifth straight week. Later prices went up after Fed came out with its latest statements on US economy.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $43.6/barrel (higher by $2.2 or 4%) on the New York Mercantile Exchange. Last week, crude prices ended higher by 9%. Prices had reached a low of $41 earlier during the day today.

Prices reached a high of $147 on 11 July but have dropped almost 65% since then. Year to date, in 2009, crude prices are lower by 14%. On a yearly basis, crude prices are lower by 53%.

The Energy department reported today that U.S. crude stockpiles jumped 6.2 million barrels last week to reach 338.9 million barrels. That's the highest level the EIA has reported since August 2007. U.S. refineries operated at 82.5% of their operable capacity last week, down from the 83.3% a week ago.

EIA also reported that gasoline inventories fell 100,000 barrels, and distillate fuel stockpiles, which include heating oil and diesel, dropped 1 million barrels last week.

Total petroleum production supplies in the U.S. averaged 19.4 million barrels a day over the past four-week period, down 4% compared to the similar period last year. Using nearly 20 million barrels a day, the U.S. is still the world's largest oil consumer. China, the second largest, only uses about 7 million barrels a day.

Today, The Federal Open Market Committee kept its interest rate target in a range of zero to 0.25%, as expected. It said it would continue to flood the financial system with money. Regarding the economy, the Fed admitted that the economy was in worse shape than in its prior meeting in December. But a gradual recovery will begin later this year. The central bank stressed that deflation was the biggest concern

Against this background, March reformulated gasoline gained 6.7% to $1.1835 a gallon and March heating oil rose 3.4% to $1.4215 a gallon.

February natural gas futures fell slightly to $4.476 per million British thermal units.

source: Capital Market

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