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Thursday, February 04, 2010

Crude pares early gains


Prices end lower as crude inventories rise more than expected

Crude oil prices ended lower on Wednesday, 03 February 2010. Prices fell as crude inventories rose more than expected. Earlier during the day, upbeat economic reports had pushed crude prices higher.

Strong economic reports generally tend to push crude prices higher on anticipation of higher demand in coming months. The strong dollar further pushed crude price lower today.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $76.98/barrel (lower by $0.25 or 0.3%). Last week, crude ended lower by 2.4%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is still lower by 4.3%.

The Energy Department in US reported on Wednesday, 03 February 2010 crude oil inventories rose by 2.3 million barrels in the week ended 29 January 2010. Market was expecting a decline of 1 million barrels in crude stocks.

In the weekly inventory report, the EIA also said inventories of distillate, which includes heating oil, fell by 948,000 barrels, while gasoline stocks fell by 1.3 million barrels. Market was expecting a buildup of 1.5 million barrels in gasoline stocks. The report also stated that refinery utilization fell to 77.7%, while it was expected to rise 0.25% to 78.75%.

Among economic data expected for the day, The Institute for Supply Management reported on Wednesday, 03 February 2010 that the service sector of the US economy moved back into growth territory in January 2010. The ISM non-manufacturing index rose to 50.5% from 49.8% in December against an expected figure of 51.

Readings above 50% in the diffusion index indicate that activity at more firms is expanding than contracting. The index had been above 50% for two months in the fall but then slipped under that threshold in November and December. Only four industries reported growth, while 11 reported contraction.

A private sector job report also showed that US economy had shed the least number of jobs in January 2010 since the recession hit in 2007.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currenciesrose by almost 0.5%.

Among other energy products on Wednesday, March reformulated gasoline rose 3 cents to $2.04 a gallon and March heating oil was down 1 cent at $2.02 a gallon.

Also on Wednesday, March natural-gas futures fell 3 cents to $5.42 per million British thermal units. The EIA on Thursday will release its estimate of natural gas in storage in the latest week.

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 19 (0.53%) higher at Rs 3,573/barrel. Natural gas for February delivery closed higher by Rs 0.5 (0.12%) at Rs 254/mmbtu.

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