Crude slips on recession fears

Weak job data rekindle recession fears

Crude prices dropped more than $1 on Friday, 4 January, 2008 after a US report came up with much below-expected job data. The same raised concern of a recession that would curb energy demand.

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 $97.91/barrel (lower by $1.27/barrel or 1.3%) on the New York Mercantile Exchange. Earlier, during the trading hours, crude oil for February delivery fell to almost $97.1. At this close, prices ended $2 higher for the week.

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.

In the currency market, the dollar fell to a one-month low against the euro on speculation the Federal Reserve will cut borrowing costs by a half percentage point to bolster the economy.

Brent crude oil for February settlement on Friday fell 81 cents to $96.79 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 ends 5% higher for the week

Natural gas in New York advanced on forecasts that colder weather in some regions will increase demand to heat homes and businesses. Gas for February delivery rose 16.7 cents (2.2%) to settle at $7.841 per million British thermal units. It ended 4.8% higher this week. Prices are 27% higher on a yearly basis.

On Friday, the Energy department reported that natural gas supplies fell 87 billion cubic feet to 2.92 trillion cubic feet in the week ended 28 December.

Against this backdrop, February reformulated gasoline lost 3.04 cents to $2.511 a gallon and February heating oil fell 3.36 cents to $2.6855 a gallon.

At the MCX, crude oil for January delivery closed at Rs 3,836/barrel, lower by Rs 64 (1.6%) against previous day’s close. Natural gas for December delivery closed at Rs 306.3/mmtbu, higher by Rs0.7/mmtbu (0.23%).

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.