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Thursday, February 18, 2010

Crude shoots up


Strong data and weak dollar take prices higher

Crude oil prices once again shot up on Tuesday, 16 February 2010. Prices rose as Greece's fiscal problems seemed to reduce thereby weakening the dollar and increasing the appeal of commodities as an alternate investment. Better than expected economic report for the day also boosted prices.

On Tuesday, crude-oil futures for light sweet crude for March delivery closed at $77.01/barrel (higher by $2.88 or 3.9%). Last week, crude gained 4%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is lower by 2.7%.

In the currency market on Tuesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies slipped from its recent nine month highs and fell by almost 0.8%. The euro rose 1.3% as euro-zone finance ministers met in Brussels to discuss Greece's public finances.

Among economic report scheduled for the day, the Federal Reserve Bank of New York's Empire Manufacturing Survey showed conditions for New York manufacturers improved sharply in February, with its business conditions index rising to 24.91 this month, from 15.92 in January. Market had expected a reading of 16 in February.

Last Friday, the Energy Information Administration reported an increase of 2.42 million barrels in U.S. crude inventories in the week ended 5 February 2010, a bigger buildup than had been expected. The report was delayed by two days because of a snowstorm that shut down government offices in Washington, D.C. The EIA also said gasoline supplies rose by 2.3 million barrels, while distillate stocks fell by 356,000 barrels. Market was looking for an increase of 1 million barrels for gasoline and a decline of 1.75 million barrels for distillates.

In the latest monthly report, Paris-based IEA reported on last Thursday, that it expects global oil demand this year to be 170,000 barrels a dayhigher than previously expected. Demand is estimated at 86.5 million barrels a day, representing an increase of 1.6 million barrels a day compared with 2009 levels.

Among other energy products on Tuesday, gasoline for March delivery rose 6 cents to $1.99 a gallon, while heating-oil for the same month gained 8 cents to $2 a gallon.

Also on Tuesday, natural gas sold off in the late morning and closed down 2.7% at $5.32 per MMBtu.

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 48.8% 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 111 (3.2%) higher at Rs 3,543/barrel. Natural gas for February delivery closed lower by Rs 5.7 (2.2%) at Rs 248.5/mmbtu.

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