Crude shoots back above $94

Prices increase on unexpected drop in crude and fuel inventories

Unexpected drop in crude inventories taking fuel inventories to two-year low level sent crude prices to a new all time high today. Prices crossed and closed above the $94/barrel mark for the first time ever. A falling dollar just aggravated the situation further. Till yesterday, traders had speculated that this week’s energy inventory report is expected to show rise in US crude inventories.

For the day ending Wednesday, 31 October, 2007, crude-oil futures for light sweet crude for December delivery closed at $94.53/barrel (higher by $4.15/barrel or 4.6%) on the New York Mercantile Exchange. Prices rose to $94.74/barrel today earlier in the day during intraday trading. Prices are up 61% on a yearly basis. Futures prices for petroleum products and natural gas also rose today. Oil rose 16% in October, the biggest one-month gain since September 2004.

As per the weekly inventory report by the Energy Department, U.S. commercial crude oil inventories, fell by 3.9 million barrels to 312.7 million barrels in the week ending 26 October, the lowest since October 2005. Market was expecting a build up of 1.25 million barrel in crude inventories. Refinery capacity utilization fell sharply by 0.9% to 86.2%.

Also, the EIA reported that gasoline supplies rose by 1.3 million barrels to 195.1 million barrels in the latest week, down from last year's 206.4 million, while distillate stocks, which include heading oil, diesel and jet fuel, grew by 800,000 barrels to 135.3 million barrels, down from 144.1 million of the same period in last year.

Brent crude oil for December settlement rose $3.19 (3.7%) to $90.63 on the London-based ICE Futures Europe exchange.

In the currency market today, the dollar hit a record low of $1.4503 per euro after the Federal Open Market Committee, the Fed's rate-setting arm, cut the fed funds rate by 0.25% to 4.5% today afternoon.

All crude product prices shoot up

Natural gas rose in New York as traders shifted their focus to the arrival of cold weather and crude oil rose to a record. Gas for December delivery rose 30.9 cents (3.9%) to settle at $8.33 per million British thermal units

Against this backdrop, November reformulated gasoline jumped 3.7% to $2.3400 a gallon and November heating oil rose 3.4% to $2.5078 a gallon.

At the MCX, crude oil for November delivery closed at Rs 3687/barrel, higher by Rs 88 (2.4%) against previous day’s close. Natural gas closed at Rs 324.7/mmtbu as against previous close of Rs 316.9/mmtbu, higher by Rs 7.8/ 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.