Crude gives up almost $3

Demand concerns and above average temperature put pressure on price

Crude prices continued to be affected by recession fears. Crude prices dropped more than $2 on Monday, 7 January, 2008 after a US report came up with much below-expected job data on last Friday. The same raised concern of a recession that would curb energy demand. Forecasts of higher-than-normal temperatures through 20 January in the Northeast part of USA also pressured prices.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

Crude-oil futures for light sweet crude for February delivery closed at $95.89/barrel (lower by $2.82/barrel or 2.9%) on the New York Mercantile Exchange. Earlier, the contract hit an intraday low of $94.55. Prices are 69% higher on a yearly basis. Last week, crude prices gained $2.

As per Labor Department, U.S nonfarm payrolls rose by a seasonally adjusted 18,000 in December. It was the weakest growth seen since August 2003. The data hit the wires last Friday, 4 January, 2008.

In the currency market, the dollar rose against most major counterparts. The dollar index, which tracks the performance of the greenback against a basket of other currencies, gained 0.6% to 76.210.

Brent crude oil for February settlement today fell $2.4 (2.5%) to $94.39 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 remains the only exception registering gains

Natural gas in New York rose amid forecasts for lower temperatures and higher demand next week. Gas for February rose 3.8 cents (0.5%) to settle at $7.879 per million British thermal units.

Against this backdrop, February reformulated gasoline fell 8.12 cents (3%) to end at $2.4298 a gallon. February heating oil dropped 9 cents (3%) to finish at $2.5935 a gallon.

As per National Weather Service, above average temperature will dominate most part of US for the next two weeks. This is the time of peak demand for gasoline and heating oil.

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.