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Monday, March 16, 2009

Crude ends marginally lower

Prices fall as traders think that OPEC will not cut production

Crude prices ended lower on Friday, 13 March, 2009. Prices rose earlier during the week as traders mulled over OPEC's forthcoming meeting at Vienna this weekend where the cartel is expected to decide another production cut to restore crude prices. But on Friday, traders had a negative feeling regarding the production cuts.

On Friday, crude-oil futures for light sweet crude for April delivery closed at $46.25/barrel (lower by $0.78 or 1.7%) on the New York Mercantile Exchange. For the week, crude ended higher by 1.6%. For the month of February, crude prices had ended higher by 1.5%.

Prices had remained extremely volatile this week. While, prices had shot up by 11% on one day, it also lost almost 10% in two days of trading.

Prices reached a high of $147 on 11 July, 2008 but have dropped almost 68% since then. Year to date, in 2009, crude prices are higher by 9.6%. On a yearly basis, crude prices are lower by 58%.

OPEC has been trying to cut production consistently in order to step up prices from their current low levels. There has been conflicting reports in the market regarding the fact that OPEC is likely to reduce output in March, 2009. OPEC has already agreed to cut cartel quotas by 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. The cartel is supposed to meet on 15 March, 2009 at Vienna.

On Friday, the IEA said in the monthly report that global oil supply in February is estimated at 83.9 million barrels a day, down 1 million barrels from a month ago and 3.4 million barrels from a year ago. The agency also lowered its forecast for this year's global oil demand to 84.4 million barrels a day, 1.5%, or 1.2 million barrels, lower than a year ago.

Earlier during the week, the EIA had reported in its weekly inventory report that crude inventories rose by 700,000 million barrels last week. Market had expected a decline of 1 million barrels. As per the report, refinery capacity utilization rate remained low at 82.7%. It also showed that inventories at Cushing, Oklahoma, the delivery point for Nymex futures, fell for a fourth week to $33.6 million barrels.

The EIA report also showed petroleum demand has been falling. Total petroleum products supplies over the past four weeks, including gasoline, jet fuel and diesel, averaged 19.3 million barrels a day, down by 2.1% from a year ago. But gasoline demand over the past four weeks rose by 1.6% from a year ago.

Also at the Nymex on Friday, April reformulated gasoline rose 0.5% to $1.3529 a gallon and April heating oil lost 2.4% to $1.1972 a gallon.

Natural gas for April delivery ended at $3.932 per million British thermal units, down 1.6%.

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

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