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Tuesday, February 02, 2010

Crude climbs up

Strong economic data and weak dollar lift crude prices

Crude oil prices ended higher on Monday, 1 February 2010. Prices rose due to better than expected economic reports and as cold temperature once again gripped parts of US.

Strong economic reports generally tend to push crude prices higher on anticipation of higher demand in coming months. The weak dollar further aided crude's climb today.

On Monday, crude-oil futures for light sweet crude for March delivery closed at $74.6/barrel (higher by $1.6 or 2%). Earlier, the contract had fallen to an intraday low of $72.49 a barrel. Last week, crude ended lower by 2.4%. In January 2010, crude ended lower by 8.3%.

Among economic data expected for the day, The Institute for Supply Management in US reported on Monday, 01 February 2010, that its index rose to 58.4 in January 2010 from 54.9 in December 2009. A figure of 56 was expected by market. It's the highest reading since August 2004.

Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting. The report indicated that nation's manufacturing firms were growing at a very strong pace in January 2010.

But enthusiasm over the report was a bit tempered by a steeper-than-expected 1.2% drop in construction spending during December. Separately, personal income during December was up 0.4% in a slightly sharper increase than had been expected, but spending during December increased at a softer-than-expected pace of 0.2%. Core personal consumption expenditures increased just 0.1% month-over-month, but that was in-line with expectations.

In the currency market on Monday, the dollar index, which weighs the strength of dollar against the basket of six other currencies fell by almost 0.2%.

Among other energy products on Monday, heating oil for the March rose 1.9% to $1.96 a gallon.

Also on Monday, natural gas for March delivery gained nearly 6% to $5.43 per million British thermal units.

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 53.5% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for February delivery closed Rs 57 (1.7%) higher at Rs 3,435/barrel. Natural gas for February delivery closed higher by Rs 11 (4.6%) at Rs 250.6/mmbtu.

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