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Thursday, December 24, 2009

Crude shoots up

Prices end substantially higher as inventories drop more than expected 


Crude prices shot up considerably higher on Wednesday, 23 December 2009. Prices rose as energy department reported a more than expected drop in crude supplies for last week. The weak dollar also aided in crude prices gliding up.

On Wednesday, crude-oil futures for light sweet crude for February delivery closed at $76.67/barrel (higher by $2.27 or 3.1%).

Last week, crude ended higher by almost 5%. Crude ended month of November, higher by 0.4%. It reached a high of $82 earlier in October this year.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 46% since then.

EIA reported today that crude inventories fell 4.9 million barrels in the week ended 18 December 2009. The EIA also reported that gasoline inventories fell 900,000 barrels, and distillate stockpiles, which include diesel and heating oil, fell by 3.1 million barrels. Market was expecting a drop of 2 million and 1.3 million of crude and gasoline inventories respectively. Inventories dropped as net crude imports fell 0.8% to 7.68 million barrels a day.

The report also showed that total petroleum inventories, including crude, gasoline and other petroleum products, decreased by 14.2 million barrels last week to 1,059.4 million barrels, but were still above the upper limit of the average range for this time of year.

In the latest meet at Angola yesterday, members of the OPEC oil cartel decided to make no changes to current production quotas. The decision was in line with market expectations. In keeping its quotas unchanged, OPEC cited "shrinking industrial production, low private consumption and high unemployment" in the global economy.

OPEC said in its monthly report that the 11 members bound by production quotas produced 26.6 million barrels a day of crude in November, up for an eighth straight month. OPEC had agreed to set their quotas at 24.845 million barrels a day starting from the beginning of this year.

Last week, in the latest report, OPEC, 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.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies fell by almost 0.7%.

Among other energy products on Wednesday, January gasoline rose 4.1% to $1.9666 a gallon as January heating oil added 3.2% to $2.0118 a gallon.

Also on Wednesday, January natural-gas futures added 1.9% to $5.821 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 January delivery closed higher by Rs 23 (0.66%) at Rs 3,492/barrel. Natural gas for December delivery closed higher by Rs 0.7 (0.26%) at Rs 266.1/mmbtu.
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