A new high for crude price

OPEC comments pushes crude above $100 mark

Crude prices ended substantially higher today, Tuesday, 19 February, 2008. Prices rose today after comments from Organization of Petroleum Exporting Countries (OPEC) officials hinted a production cut in the near term. Oil also rose after the U.S. dollar fell against the euro, enhancing the appeal of commodities as an inflation hedge.

Crude-oil futures for light sweet crude for March delivery today closed at $100.01/barrel (higher by $4.51/barrel or 4.7%) on the New York Mercantile Exchange. The price earlier rose to an intraday high of $100.1. Crude touched $100 a barrel in the first session of January and topped the historic mark in the second session.

Last week, two ministers of Organization of Petroleum Exporting Countries (OPEC) hinted that the cartel might go for a production cut in its next meeting at March, 2008. This spurted up crude prices and the same ended almost 4% higher on that day. At its 1 February meeting at Vienna, OPEC members decided to keep current output levels unchanged.

Again over this weekend, it was reported that Iranian oil minister said that reducing production is very normal for OPEC in March. Iran is OPEC’s second largest oil producer.

Brent crude oil for April settlement today rose $3.65 (3.9%) to $98.56 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.

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

Natural gas gains 20% this year

Natural gas price rose substantially today. Natural gas advanced to the highest in 15 months on forecasts that colder weather in the eastern half of the U.S. will spur demand and as crude oil touched a record. Natural gas for March delivery rose 31.7 cents (3.7%) to settle at $8.977 per million British thermal units. Gas has advanced 20% so far this year.

Against this backdrop, March reformulated gasoline advanced 10.93 cents (4.4%) to close at $2.6031 a gallon, after earlier touching $2.6169. March heating oil surged 11.54 cents, or 4.4%, to $2.7614 a gallon. Gasoline surged after an explosion yesterday shut Alon USA Energy’s Big Spring, Texas, refinery.

In a monthly report released last week, EIA said the world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand.

At the MCX, crude oil for February delivery closed at Rs 3,901/barrel, higher by Rs 110 (2.9%) against previous day’s close. Natural gas for February delivery closed at Rs 357.3/mmtbu, higher by Rs 7/mmtbu (2%).