Crude at $100

Crude prices soar as traders expect another drawdown in crude inventories

Fresh violence in Nigeria and supply concerns pushed crude oil prices to record territory today, Wednesday, 02 January, 2008. Price also rose as dollar weakened. Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

Today crude-oil futures for light sweet crude for February delivery closed at $99.62/barrel (higher by $3.64/barrel or 3.8 %) on the New York Mercantile Exchange. Earlier, during the lunch hours, crude oil for February delivery rose $4.02 (4.2%) to $100 a barrel on the New York Mercantile Exchange, the highest since trading began in 1983.

Prices shot up today after fresh violence was reported at Nigeria, which is the world's 12th-largest oil producer and ranks as the fifth-largest exporter of oil to the U.S. prices also rose after traders speculated that Energy Department will report steep drawdown in crude inventories for week ended 28 December, 2007.

In the currency market today, the dollar extended losses against most major rivals, mainly against the yen after a weak Institute of Supply Management report. The ISM report said the U.S. factory sector contracted in December for the first time in nearly a year as new orders collapsed. Dollar slipped more than 1% against the euro.

Brent crude oil for February settlement today rose $3.99 (4.3%) to $97.84 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in Fy 2007, the most since 1999 when prices more than doubled.

Heating oil and gasoline contracts make record

February natural gas today rose 36.2 cents to stand at $7.845 per million British thermal units.

Against this backdrop, February reformulated gasoline gained 7.81 cents to $2.5689 a gallon, and February heating oil soared 9.1 cents to $2.7404 a gallon. Gasoline contract touched an intraday record of $2.5784. Heating oil futures touched $2.7465, the highest intraday price since trading began in 1978.

At the MCX, crude oil for January delivery closed at Rs 3,898/barrel, higher by Rs 124 (3.3%) against previous day’s close. Natural gas for December delivery closed at Rs 306.6/mmtbu, higher by 10.5/mmtbu (3.5%).

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, 2008 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. The IEA, an adviser to 27 nations, said global demand in 2008 will rise 2.5% to 87.8 million barrels a day.

The U.S. Energy Information Administration will issue inventories reports at 10:30 a.m. Eastern tomorrow, a day later than usual because of the New Year's holiday.