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Friday, January 22, 2010

Crude keeps sliding down

Prices drop despite falling inventory

Crude oil prices dropped by more than 2% once again on Thursday, 21 January 2010. Prices fell despite a drop in crude inventories for last week and as the dollar headed up strongly.

On Thursday, crude-oil futures for light sweet crude for March delivery closed at $76.08/barrel (lower by $1.66 or 2.1%). Crude ended last week lower by 5.7%. On a year to date basis till date, crude is lower by 6%.

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 50% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

In the weekly inventory report, the EIA reported today that crude inventories fell by 471,000 barrels in the week ended 15 January 2010. Market was expecting the report to show a build up of 2 million of crude inventories.

In the currency market on Thursday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose on concerns that Greece and other countries might have problems repaying their loans. The dollar also strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but are port said that it had asked several banks to stop issuing loans.

Among economic reports expected for the day, the Conference Board in US reported on Thursday, 21 January 2010 that leading U.S. economic indicators increased 1.1% in December 2009. Also, the Philadelphia Fed said its manufacturing index slipped to 15.2 in January from 22.5 in December. The index showed shipments, new orders, and employment expanded in factories in the region, but at a slower pace than in December.

Earlier during the week, in the latest report, the Organization of the Petroleum Exporting Countries said that world oil demand is forecast to grow by 800,000 barrels a day this year to average 85.1 million barrels a day, representing no major change from last month's forecast.

Paris based, IEA, left its forecasts for global oil demand for 2010 virtually unchanged in its latest monthly report last week. It forecasts demand of 86.3 million barrels a day in 2010, up 1.7%, or 1.4 million barrels a day higher than 2009.

Also on Thursday, natural gas for February delivery ended up 12.4 cents at $5.62 per million British thermal units. It earlier rose to a high of $5.74, with traders anticipated a large drop due to cold weather in the U.S. The EIA reported today that gas in storage stood at 2,607 billion cubic feet in the week ended 15 January2010, a drop of 245 billion cubic feet from the prior week.

At the MCX, crude oil for February delivery closed Rs 56 (1.6%) lower at Rs 3,536/barrel. Natural gas for January delivery closed higher by Rs 4.1 (1.6%) at Rs 258.2/mmbtu.
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