Crude drops for third consecutive day

Crude prices slip as OPEC hints at increasing production in next meeting

Crude prices slipped today as traders speculated that demand is likely to slow down due to economic growth concerns. Comments from Organization of Petroleum Exporting Countries (OPEC) official regarding increasing production in next meeting also led to crude prices slipping. This was the third consecutive drop in crude prices.

For the day ending Monday, 17 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $90.63/barrel (lower by $0.64/barrel or 0.7%) on the New York Mercantile Exchange. Price earlier slipped by more than $1.7/barrel during the day. Prices reached a high of $99.2 on 21 November. The Nymex January contract expires at the close of trading tomorrow. The more-widely held February contract fell 50 cents to $91.05 a barrel.

As per the Algerian Oil Minister, Chakib Khelil, OPEC may decide to increase quotas when it meets 1 February, 2008. He is expected to take over as President of OPEC on 1 January, 208.

Members of the OPEC left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a 1 February meeting in Vienna.

In the currency market today, the dollar weakened earlier but then began trading mostly higher, benefiting from U.S. fund inflow data and weak data from the eurozone. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, edged down 0.07% at 77.380.

Brent crude oil for February settlement fell $0.40 (0.4%) to $91.29 on the London-based ICE Futures Europe exchange.

Global oil demand to rise 2.8% in 2008

Natural gas in New York was little changed on a forecast for climbing temperatures through the end of December. Gas for January delivery rose 1 cent to settle at $7.035 per million British thermal units.

Against this backdrop, January reformulated gasoline fell 0.63 cents to $2.3354 a gallon and January heating oil edged down 1 cent at $2.5979 a gallon.

As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. The IEA, an adviser to 27 nations, said global demand in 2008 will rise 2.5% to 87.8 million barrels a day.

At the MCX, crude oil for January delivery closed at Rs 3556/barrel, lower by Rs 42 (1.2%) against previous day’s close. Natural gas for December delivery closed unchanged at Rs 278.2/mmtbu.