Prices end more than $2 down as traders fail to overcome recession fears
Crude prices once fell today for the second consecutive day today, Wednesday, 23 January, 2008 after Federal Reserve cut rates by 75 basis points yesterday. Price slipped by more than $2/barrel today as traders speculated that cut in interest rates by Federal Reserve will not prevent the US economy from entering a recession. Recession, in turn lower the demand for crude oil.
Crude-oil futures for light sweet crude for February delivery today closed at $86.99/barrel (lower by $2.22/barrel or 2.5%) on the New York Mercantile Exchange. Futures touched $85.42 after the Fed announcement yesterday during intraday trading. Prices are 58% higher than a year ago.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
Yesterday, 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.
Brent crude oil for March settlement today fell $1.83 (2.1%) to $86.62 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 sixth consecutive day
Natural gas fell for sixth day amid speculation an emergency interest rate cut by the Federal Reserve won't be enough to prevent the U.S. economy from sliding into recession, paring demand for gas. Gas for February delivery fell 4.9 cents (0.6%) to settle at $7.621 per million British thermal units.
Against this backdrop, February reformulated gasoline dropped 2.98 cents to $2.2508 a gallon and February heating oil fell 4.95 cents to $2.4231 a gallon.
In the currency markets today, the dollar gained on the euro and pound on growing concerns about U.K. and euroz one growth prospects but slipped against Japan's yen. The dollar index, which tracks the performance of the greenback against six other major currencies, was up at 76.429.
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.
At the MCX, crude oil for February delivery closed at Rs 3,449/barrel, lower by Rs 62 (1.77%) against previous day’s close. Natural gas for January delivery closed at Rs 300.2/mmtbu, lower by Rs 3.9/mmtbu (1.3%).
The Energy Department is scheduled to release its weekly report on inventories tomorrow at 10:30 a.m. in Washington, a day later than usual because of the Martin Luther King Day holiday on 21 January.