Crude witnesses major drop

Crude prices drop on profit taking as November contract expires

After going up by 6% last week, crude oil prices slipped today and settled below $88/barrel. Prices eased as dollar strengthened against most of its rival currencies. Prices also eased on reports of a cease fire in Turkey. Profit-taking was another reason for the rise in price, especially given that the November front-month crude contract expired at the end of today’s session.

For the day ending Monday, 22 October, 2007, crude-oil futures for light sweet crude for November delivery closed at $87.56/barrel (lower by $1.04/barrel or 1.2%) on the New York Mercantile Exchange. Last Friday price had peaked to $90.02/barrel after dropping later in the day.

Natural gas declined in New York on unseasonably warm weather, ample inventories and concern U.S. economic growth may slow. Gas for November delivery fell 15 cents (2.1%) to settle at $6.891 per million British thermal units.

November heating oil slipped 1.97 cents to end at $2.3109 a gallon and November reformulated gasoline dropped 3.53 cents to $2.1334 a gallon.

Last week, prices continued to climb up on concern that Turkey's military may attack Kurdish bases in Iraq, which has the world's third-largest oil reserves. Since 2003, due to US invasion of Iraq, shipments of oil from northern Iraq to Turkey have been cut for most of the time because of attacks on pipelines. The problems gave birth to concerns that this might lead to slowing down of shipments as peak season is commencing and would call for more demand for meeting the peak heating demand.

At the MCX, crude oil for October delivery closed at Rs 3432/barrel, higher by Rs 3 (0.08%) against previous day’s close. Natural gas closed at Rs 301.7/mmtbu as against previous close of Rs 305.9/mmtbu, lower by Rs 4.2/ mmtbu.

OPEC 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 Nigeria have curtailed shipments 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.