Crude price plunges

Crude prices close more than $3 lower as IEA cut its forecast for global demand

Crude oil prices fell today once again and closed almost $3/barrel lower as The International Energy Agency cut its forecast for global demand through 2008 as record prices could curb fuel use. Yesterday, also, prices had slipped almost $2 after Organization of Petroleum Exporting Countries (OPEC) spoke out and hinted about increasing production in near term. Prices fell after OPEC said that it might consider increasing output in its forthcoming meeting, either this month or the one in December.

For the day ending Tuesday, 13 November, 2007, crude-oil futures for light sweet crude for December delivery closed at $91.17/barrel (lower by $3.45/barrel or 1.8%) on the New York Mercantile Exchange. Price had fell to $90.18 during intra day trading. 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.

Brent crude oil for December settlement fell $3.15 (3.4%) to $88.83 on the London-based ICE Futures Europe exchange.

The Paris-based IEA 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.

The IEA has cut its fourth-quarter forecast three times since August on expectations higher gasoline prices and an economic slowdown in the U.S. will restrain demand.

Yesterday, as per reports, Saudi Arabia’s oil minister had commented that OPEC, will discuss increasing production at its next meeting later this year. OPEC heads of state are reported to gather in Riyadh for a summit this weekend. The next scheduled OPEC policy meeting is on 5 December in Abu Dhabi.

All eyes set on tomorrow’s inventory report

Natural gas in New York was little changed amid speculation record U.S. inventories are ample to meet demand in a winter forecast to be warmer than average. Gas for December delivery declined 1.2 cents to settle at $7.949 per million British thermal units.

Against this backdrop, December reformulated gasoline fell 9.98 cents to $2.3167 a gallon and December heating oil dropped 8 cents at $2.5021 a gallon.

At the MCX, crude oil for November delivery closed at Rs 3590/barrel, lower by Rs 125 (3.4%) against previous day’s close. Natural gas closed at Rs 314.2/mmtbu as against previous close of Rs 316.2/mmtbu, lower by Rs 2/ 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 crude oil and fuel products for week ended Friday, 9 November tomorrow morning at Washington at 10.30 E.T.