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Wednesday, August 26, 2009

Crude registers steep drop

Price pare earlier gains as US budget deficit expands

Crude prices pared earlier gains and ended lower on Tuesday, 25 August, 2009. Prices rose earlier during the day as consumer confidence in US showed signs of improvement. But then prices slipped as U.S. government report showed the highest federal deficit in more than six decades.

On Tuesday, crude-oil futures for light sweet crude for October delivery closed at $72.05/barrel (lower by $2.32 or 3.1%). During intra day trading, it rose to a high of $75. Last week, crude ended higher by 6.1%.

For the month of July, 2009, crude ended lower by a marginal 0.6%. For the second quarter, crude ended higher by 40%. Crude prices had rallied 11.3% in the first quarter of 2009.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 52% since then. Year to date, in 2009, crude prices are higher by 48%.

The Congressional Budget Office estimated on Tuesday that the budget deficit will total $1.6 trillion in 2009. At 11.2% of gross domestic product, that will be the highest level since World War II.

Earlier during the day, the Conference Board reported that consumer-confidence index in US rose to 54.1 in August from an upwardly revised 47.4 in July.

In the currency market on Tuesday, the dollar firmed earlier during the day. But the dollar earlier came under pressure after reports showed U.S. home prices rose in June and consumer confidence rose in August. The dollar also remained relatively low on announcement about the nod to President Barack Obama's reappointment of Federal Reserve Chairman Ben Bernanke to serve a second term. The dollar index which weighs the value of dollar against a basket of six other currencies fell by 0.4%.

Also at the Nymex on Tuesday, September reformulated gasoline fell 4.21 cents, or 2.1%, to $2.007 a gallon, and September heating oil dropped 6.75 cents, or 3.5%, to $1.8559 a gallon.

September natural-gas futures fell 4.1 cents, or 1.4%, to $2.882 per million British thermal units.

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

At the MCX, crude oil for September delivery closed lower by Rs 112 (3.1%) at Rs 3,504/barrel. Natural gas for September delivery closed lower by Rs 2.1 (1.3%) at Rs 160.6/mmbtu.

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