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Thursday, December 17, 2009

Crude shoots up

Prices rise drastically as inventories drop more than expected 


Crude prices ended higher on Wednesday, 16 December, 2009. Prices shot up today following the weekly inventory report from the energy department which showed more than expected drop in crude supplies for last week.

On Wednesday, crude-oil futures for light sweet crude for January delivery closed at $72.66/barrel (higher by $1.97 or 2.8%). It rose to a high of $73.63 earlier during the day. Before yesterday, the contract had lost almost 12% in the past nine sessions. Last week, crude ended lower by 7.4%. Crude ended month of November, higher by 0.4%.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 56% since then.

EIA reported today that crude inventories fell by 3.7 million barrels last week. This was much higher than expected as traders anticipated a drop of almost 2 millions barrels for last week.

In the currency market on Wednesday, the dollar fluctuated quite a bit. It fell initially in the day but then gathered strength following Fed's remarks which made sure not to extend its liquidity assistance and emergency loan facilities any further than the dates that were decided previously. It also said it is going to keep interest rates near zero for quite some tome now. The dollar once again lost some steam at the end.

In the latest report, OPEC, yesterday, revised higher its forecast for world oil demand next year by 70,000 barrels a day, to 85.13 million barrels, citing demand from developing countries such as China and India. However, the cartel said the pace of recovery in developed countries, especially in the U.S., remained at risk and could dampen demand.

The cartel also said that the supply of oil from non-OPEC nations will likely expand by 500,000 barrels a day this year, slightly higher than last month's forecast. In November, OPEC crude production averaged 29.1 million barrels a day.

On last Friday, Paris-based IEA, hiked its forecast for 2010 global oil demand by 130,000 barrels a day to an average 86.3 million barrels a day. That represents an increase of 1.7%, or 1.5 million barrels a day, compared to 2009. The IEA also left its forecast for 2009 oil demand virtually unchanged at 84.9 million barrels a day, a decline of 1.6% year-on-year.

Among other energy products on Wednesday, gasoline for January delivery rose 2.5 cents to $1.87 a gallon, and heating oil for January delivery gained 7 cents to $1.97 a gallon.

Also on Wednesday, natural gas for January delivery fell 6 cents to $5.46 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 December delivery closed higher by Rs 105 (3.2%) at Rs 3,402/barrel. Natural gas for December delivery closed higher by Rs 1.7 (0.66%) at Rs 257/mmbtu.
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