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Tuesday, December 22, 2009

Crude slips again

Prices drop as dollar heads up and traders anticipate a rate hike 


Crude prices ended lower on Monday, 21 December 2009. Prices fell as traders mulled over the fact that there might be an interest rate hike in the medium term. The relatively strong dollar was also a reason for a drop in prices today. There are a plethora of economic reports expected at US market this week which might show that the economy is slowly emerging out of the recession and hence lead to a rate hike.

On Monday, crude-oil futures for light sweet crude for January delivery closed at $72.47/barrel (lower by $0.89 or 1.2%). Earlier in the day, it was trading higher.

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 but since then it has been dropping most of the days.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 50% since then.

Oil prices shot up last Friday, after Iraq said Iranian forces occupied the area around an oil well 280 miles south of Baghdad. The countries have the world's second and third biggest oil reserves in the world.

In the currency market on Monday, the greenback started the day relatively weak with the dollar index trading with a fractional loss after it was down roughly 0.2% earlier this morning. Then, the dollar's move caused a pullback in commodity prices. The dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.3%. Last week, the dollar index gained almost 1.7%.

OPEC ministers are scheduled to meet this week at Angola and decide on the production quota. Market is anticipating no change in the same.

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.

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.

Among other energy products on Monday, January gasoline futures fell 2.6% to $1.8691 a gallon, January heating oil fell 1.1% to $1.9452 a gallon.

Also on Monday, January natural gas dropped 2% to $5.669 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 unchanged at Rs 3,504/barrel. Natural gas for December delivery closed higher by Rs 2.7 (1%) at Rs 272.3/mmbtu.
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