Crude fails to sustain $100

Crude prices end lower as gasoline and diesel inventories rise

Crude prices crossed the $100/barrel mark once again during intraday trading today, but gave up earlier gains and closed finally lower for the day. Crude oil fell after weekly inventory report by Energy Department showed that U.S. gasoline and diesel inventories rose as refineries increased operating rates.

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 $99.12/barrel (lower by $0.50/barrel or 0.5 %) on the New York Mercantile Exchange. Earlier, during the trading hours, crude oil for February delivery rose 47 cents $100.09 a barrel on the New York Mercantile Exchange, the highest since trading began in 1983. At today’s close, prices are 70% higher on a yearly basis.

As per today’s weekly inventory report, EIA reported that U.S. gasoline supplies rose by 1.9 million barrels during the week ended 28 December, 2007, while distillate supplies, which include heating oil and diesel, grew by 600,000 barrels. Inventories of heating oil, however, were surprisingly up, rising for the first time in four weeks.

EIA also reported that U.S. crude inventories fell for a seventh week, down by 4 million barrels to 289.6 million barrels in the week ended 28 December. U.S. refineries operated at 89.4% of their operable capacity last week, up from the previous week's 88.1%.

Brent crude oil for February settlement today fell 20 cents to $97.64 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.

Natural gas drops for first time in six days

Natural gas in New York fell for the first time in six days on forecasts that milder weather will curb U.S. demand to heat homes and businesses. Gas for February delivery fell 17.6 cents (2.2%) to settle at $7.674 per million British thermal units. The futures are up 25% from a year ago.

Against this backdrop, February reformulated gasoline lost 2.75 cents to $2.5414 a gallon and February heating oil fell 2.13 cents to $2.7191 a gallon.

At the MCX, crude oil for January delivery closed at Rs 3,900/barrel, higher by Rs 2 (0.05%) against previous day’s close. Natural gas for December delivery closed at Rs 305.6/mmtbu, lower by Rs1/mmtbu (0.32%).

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.