Crude plunges back to $90

Prices slip as Goldman Sachs announces that it is time to take profits

After marking record highs since the past couple of days, crude oil prices slipped today drastically and was back at the $90/barrel level. Prices slipped due to a number of reasons. Traders speculated that this week’s energy inventory report is expected to show rise in US crude inventories. Expected resumption in production at Petroleos Mexicanos also helped in easing prices. Top of it, there were reports that Goldman Sachs has urged investors to take profits.

For the day ending Tuesday, 30 October, 2007, crude-oil futures for light sweet crude for December delivery closed at $90.38/barrel (lower by $3.15/barrel or 3.4%) on the New York Mercantile Exchange. Prices rose to $93.8/barrel today earlier in the day during intraday trading. Prices are up 48% on a yearly basis. Futures prices for petroleum products also fell today, but natural gas bucked the trend.

Mexico's state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S, said yesterday that it halted production of 600,000 barrels a day due to bad weather. The company plans to resume production in a couple of days.

As reported, Goldman said in a report it was closing its long position in New York oil futures. Long positions are bets that prices will rise.

Brent crude oil for December settlement fell $2.88 (3.2%) to close at $87.44 a barrel on the London-based ICE Futures Europe exchange.

In the currency market today, the dollar was little changed after falling to a record $1.4438 against the euro yesterday. Dollar had dropped on speculation that Federal Reserve might be going for another interest rate cut day after tomorrow.

petroleum products also fell today, but natural gas bucks the trend

Natural gas rose for a fifth session in New York on forecasts for below seasonal temperatures next week in the largest consuming regions. Gas for December delivery rose 4.7 cents (0.6%) to settle at $8.021 per million British thermal units.

Against this backdrop, November reformulated gasoline fell 8.46 cents (3.6%) at $2.2428 a gallon and November heating oil dropped 4.66 cents (1.9%) at $2.418 a gallon.

At the MCX, crude oil for October delivery closed at Rs 3599/barrel, lower by Rs 38 (1.04%) against previous day’s close. Natural gas closed at Rs 316.9/mmtbu as against previous close of Rs 312.9/mmtbu, higher by Rs 4/ mmtbu.

OPEC has planned to boost daily oil production by 500,000 barrels. OPEC's production target is 27.2 million barrels a day, beginning 1 Nov. OPEC, has decided to raise their daily output by 500,000 barrels per day, starting 1 November.

Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.

The Energy Department will come out with the weekly inventory report on natural gas for week ended Friday, 26 October, tomorrow morning at Washington at 10.30 E.T.