Prices end higher by more than 10% after dropping for five straight days
Oil prices ended substantially higher on Friday, 13 February, 2009. Prices had ended lower in the previous five sessions. Earlier during the week, Energy Department had reported larger than expected build up in crude inventories for the last week.
On Friday, crude-oil futures for light sweet crude for March delivery closed at $37.51/barrel (higher by $3.53 or 10.4%) on the New York Mercantile Exchange. For the week, crude ended lower by 6.6%. Oil had shed 17% in the last five sessions.
Prices reached a high of $147 on 11 July, 2008 but have dropped almost 77% since then. Year to date, in 2009, crude prices are lower by 16%. On a yearly basis, crude prices are lower by 63%.
EIA had reported earlier during the week that crude inventories excluding those in the Strategic Petroleum Reserve gained 4.7 million barrels to 350.8 million barrels in the week ended 6 February, 2009. Inventories at Cushing, Oklahoma, the delivery point for futures traded on the New York Mercantile Exchange, rose to 34.9 million, the highest level on record.
As per the report, total products supplied over the last four-week period averaged 19.8 million barrels per day, down by 1.3% compared to the similar period last year. Meanwhile, U.S. refineries operated at 81.6% of their operable capacity last week, the lowest in four months. EIA had also reported that gasoline stockpiles fell by 2.6 million barrels while distillate fuels, which include diesel and heating oil, declined by 1 million barrels.
Recently, Paris based, IEA has reported that this year's global oil demand will fall by 1 million barrels a day, or 1.1%, from last year. If realized, it will be the biggest yearly drop since 1982. The IEA cited a worsening economic outlook across all regions as the reason for the weakness in oil demand.
Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
OPEC has been trying to cut production consistently in order to step up prices from their current low levels. OPEC agreed to reduce production by a record amount of 2.2 million barrels a day, starting from 1 January, 2009 adding to previous cuts of 2 million barrels. Overall, the reduction is equal to about 5% of the world's oil demand.
Against this background, March reformulated gasoline fell 4.1% to $1.2063 a gallon, and March heating oil dropped 1.6% to $1.30 a gallon.
March natural gas futures slid 0.6% to $4.452 per million British thermal units.
source: Capital Market
