Volatile crude ends marginally higher

Prices give up most of the day’s gains as two of the four Canadian pipelines become operational

Explosion at the four Canadian pipelines that supply crude to US took crude prices substantially higher today during the early trading hours. But then, on news that two of the pipelines are reopening, prices slipped below and ended marginally higher for the day. The other two are expected to be operational in a couple of days.

For the day ending Thursday, 29 November, 2007, crude-oil futures for light sweet crude for January delivery closed at $91.01/barrel (higher by $0.39/barrel or 0.4%) on the New York Mercantile Exchange. Today price reached beyond $95/barrel initially after two of four pipelines closed after yesterday's blast reopened today. Prices reached a high of $99.2 on 21 November. Prices are up 49% from a year ago.

Yesterday's blast killed two workers and curtailed Canadian imports to the U.S. that average 1.5 million barrels a day. The U.S. is the world's largest crude consumer and imports about 10 million barrels a day of crude.

Prior to today, prices had slipped by almost 8% in the first three days of the week.

Yesterday, crude oil price had dropped to its lowest level in almost a month after Energy Departments reported in the weekly inventory report that crude supplies fell less than expected for the week ended 23 November. Comments from Organization of Petroleum Exporting Countries (OPEC) that the cartel is ready to increase production any time also led prices erode further.

Brent crude oil for December settlement rose $0.45 (0.5%) to $90.26 on the London-based ICE Futures Europe exchange.

Natural gas supplies fall less than expected

Natural gas in New York declined after a government report showed that U.S. supplies for the week ended 23 November fell less than expected, leaving inventories at a level that are probably ample for winter heating needs. Gas for January delivery fell 3.8 cents (0.5%) to $7.448 per million British thermal units.

As per Energy Department, stockpiles fell 12 billion cubic feet to 3.528 trillion cubic feet last week. Supplies are 301 billion cubic feet (9.3%) above the five-year average.

Against this backdrop, December reformulated gasoline rose 1.45 cents to $2.2902 a gallon, and December heating oil added 1.98 cents at $2.5936 a gallon.

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.

At the MCX, crude oil for December delivery closed lower at Rs 3612/barrel, lower by Rs 18 (0.5%) against previous day’s close. Natural gas closed at Rs 297.4/mmtbu as against previous close of Rs 302.2/mmtbu, lower by Rs 4.8/ mmtbu.