Crude sheds more than $1

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US crude inventories rise for the first time in nine weeks

Crude prices fell by more than $1/barrel today, Wednesday, 16 January, 2008. Price slipped after Energy Department reported that crude stockpiles rose more than expected for the first time in nine weeks.

Crude-oil futures for light sweet crude for February delivery today closed at $90.84/barrel (lower by $1.06/barrel or 1.2%) on the New York Mercantile Exchange. Prices are 77% higher than a year ago. Last week, crude prices gained $5.3 (5.4%).

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

As per the weekly inventory report by the EIA, U.S. crude inventories rose for the first time in nine weeks, up by 4.3 million barrels to 287.1 million barrels in the week ending 11 January. U.S. crude-oil imports averaged 10.4 million barrels a day last week, up 583,000 barrels a day from the previous week. U.S. refineries operated at 87.1% of their operable capacity last week, down from the previous week's 91.3%.

EIA also reported that total commercial petroleum inventories, which include motor gas, heating oil, and crude oil, increased by 3.6 million barrels to 970.1 million barrels last week, which is about one and half months of U.S. consumption. Out of this, U.S. gasoline inventories rose 2.2 million barrels in the latest week, while distillate stocks grew 1.1 million barrels.

Brent crude oil for February settlement today fell $1.23 (1.4%) to $89.75 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, gasoline and heating oil – all register drop

Natural gas in New York declined on expectations a government report tomorrow will show that U.S. supplies are adequate. Gas for February delivery fell 6.3 cents (0.8%) to settle at $8.133 per million British thermal units.

Against this backdrop, February reformulated gasoline fell 5.48 cents to $2.2544 a gallon and February heating oil slid 4.94 cents to $2.4978 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.

At the MCX, crude oil for January delivery closed at Rs 3,609/barrel, higher by Rs 27 (0.75%) against previous day’s close. Natural gas for December delivery closed at Rs 319.2/mmtbu, higher by Rs 1.3/mmtbu (0.2%).

Tomorrow, EIA will report the inventory status of natural gas inventories for week ended 11 January, 2008. Market is expecting a drop of 60-70 billion cubic feet.