Crude price eases

Crude prices close lower after Energy Department reports unexpected build up in crude inventories

Crude oil prices fell today, Thursday, 15 November, 2007 after the weekly inventory report by Energy Department reported that there was an unexpected build up in crude inventories for the week ended 9 November, 2007. Market was expecting a decline. Prices also fell after OPEC reduced its growth forecast for the global demand for oil.

For the day ending Thursday, 15 November, 2007, crude-oil futures for light sweet crude for December delivery closed at $93.43/barrel (lower by $0.66/barrel or 0.7%) on the New York Mercantile Exchange. Price fell to $92/barrel soon after the report was out.

Brent crude oil for December settlement fell $0.42 (0.5%) to $90.94 on the London-based ICE Futures Europe exchange.

As per the weekly inventory report by the Energy Department, U.S. crude inventories rose by 2.8 million barrels to 314.7 million in the week ending 9 November. This was the first build up in five weeks. U.S. refineries operated at 87.7% of their operable capacity last week, the highest in five weeks.

The report also stated that gasoline supplies rose by 700,000 barrels to 195 million barrels in the latest week, while distillate fuel stocks decreased by 2 million barrels to 133.4 million barrels.

Last week, prices rose to $98.62/barrel during intra day trading on 7 November, 2007. Oil prices had rose 16% in October, 2007, the biggest one-month gain since September 2004.

OPEC reduces fourth-quarter estimate of global oil demand estimate

Natural gas in New York fell after a government report showed that U.S. supplies will probably be sufficient to meet winter demand and crude oil declined. Gas for December delivery fell 13.5 cents (1.7%) to settle at $7.70 per million British thermal units.

The EIA reports also showed today that U.S. natural gas inventories fell 9 billion cubic feet to 3,536 billion cubic feet as of 9 November.

Against this backdrop, December reformulated gasoline fell 3.42 cents to $2.3362 a gallon and December heating oil dropped 1.47 cents at $2.5587 a gallon.

At the MCX, crude oil for November delivery closed at Rs 3640/barrel, lower by Rs 33 (0.9%) against previous day’s close. Natural gas closed at Rs 304.7/mmtbu as against previous close of Rs 311.3/mmtbu, lower by Rs 6.6/ mmtbu.

OPEC, today, reduced its fourth-quarter estimate of global oil demand growth to 1.97%, down from 2.1%, citing warmer winter weather in the Northern Hemisphere and the higher price of gasoline. The cartel also trimmed this year's world oil demand growth to 1.4% from 1.5%, but the cartel kept the first quarter of next year unchanged at 1.8%.

Earlier, the Paris-based IEA had cut its estimate for fourth-quarter demand by 500,000 barrels a day as record prices reduced energy consumption. The IEA also said next year's demand is forecast at 87.69 million barrels a day, or 300,000 barrels a day less than a previous estimate. It was due to higher prices and weaker-than-expected economic data from the U.S. and the former Soviet Union.

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.