Prices give up earlier losses and ends higher as dollar weakens against euro
Crude prices erased earlier losses and finally ended higher for the day, today, Friday, 28 January, 2008. Prices rose today after the dollar fell against the euro. Expectations about another rate cut from Federal Reserve in its upcoming meeting on January end also boosted prices. This was crude’s third consecutive rise in prices. In the earlier two sessions, crude had gained almost $4.
Crude-oil futures for light sweet crude for February delivery today closed at $90.99/barrel (higher by $0.28/barrel or 0.3%) on the New York Mercantile Exchange. Prices are 64% higher than a year ago. Earlier it dropped more than 2% to an intraday low of $88.78.
In the currency markets today, the dollar dropped as traders increased speculation that the Federal Reserve will cut the target lending rate by a half- percentage point this week to prevent the U.S. from heading into a recession. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, lost 0.6% to 75.510.
Falling U.S. interest rates have prompted the dollar to drop against the euro and other currencies.
Last Tuesday, Federal Reserve slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations. Federal Reserve’s decision came as a surprise to everyone but Fed took the same as stocks markets worldwide, had been plunging on fear that US economy would be hitting a recession soon.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
OPEC expected to increase production in its next meeting
Brent crude oil for March settlement today rose $0.48 (0.5%) to $91.38 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 in New York rose today on expectations the Federal Reserve will cut its benchmark lending rate by half a percentage point this week. Gas for delivery under the February contract, which expires tomorrow, rose 11.2 cents (1.4%).
Against this backdrop, February reformulated gasoline gained 0.71 cents to $2.3253 a gallon and February heating oil rose 0.74 cents to $2.5265 a gallon.
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. The cartel is expected to increase production.
At the MCX, crude oil for February delivery closed at Rs 3,569/barrel, higher by Rs 20 (0.6%) against previous day’s close. Natural gas for January delivery closed at Rs 314.9/mmtbu, higher by Rs 3.9/mmtbu (1.2%).