Crude eases partly

Crude prices slip by almost $2 after gaining more than $4 yesterday

Crude prices eased partly today after traders speculated that recession in the US is avoidable as Federal Reserve will inject cash in the system. Profit booking was another reason as to why prices eased today after rallying by almost 5% yesterday.

For the day ending Thursday, 13 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $92.62/barrel (lower by $1.8/barrel or 1.9%) on the New York Mercantile Exchange. Price earlier slipped by more than $2/barrel during the day. Prices reached a high of $99.2 on 21 November. Prices are up 47% from a year ago.

Yesterday, Fed came up with new plans and said it would inject cash into money markets through some term-auction facilities. The Fed, along with the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Canada, will provide cash to the money market to get through in the coming months.

In the currency market today, the dollar rose against the euro, yen and pound, after data showed bullish retail sales and wholesale inflation at a 34-year high in November reduced investors' expectations of further aggressive interest rate cuts by the U.S. Federal Reserve. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.6% at 76.595.

On 11 December, Tuesday, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.

Yesterday, EIA had reported in the weekly inventory report that U.S. crude inventories dropped for a fourth week in the week ending 7 December, down 700,000 barrels. At 304.5 million barrels, U.S. crude inventories were at their lowest since March, 2005, but are still in the upper half of the average range for this time of year. U.S. refineries operated at 88.8% of their operable capacity last week, down from the previous week's 89.4%.

Brent crude oil for January settlement fell $1.84 (2%) to $92.18 on the London-based ICE Futures Europe exchange.

Natural gas gives up earlier gains

Natural gas futures in New York today gave up earlier gains and finally finished lower for the day. EIA reported that U.S. supplies last week declined more than expected. Stockpiles fell 146 billion cubic feet to 3.294 trillion cubic feet in the week ended 7 December as against an expected figure of 130 billion cubic feet.

Against this backdrop, January reformulated gasoline fell 3.88 cents to $2.347 a gallon and January heating oil dropped 2.37 cents at $2.6195 a gallon.

Members of the Organization of Petroleum Exporting Countries 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.

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. World oil consumption in 2008 is projected to rise by 1.4 million barrels.