Crude crosses 110 dollars

Price crosses $110 despite increase in weekly inventories

Crude prices shot up once again today, Wednesday, 12 March, 2008. Prices rose after the dollar remained under pressure today. Prices rose despite the EIA reporting a surprising increase in weekly crude inventory for week ending on Friday, 7 March, 2008.

Crude-oil futures for light sweet crude for April delivery today closed at $109.92/barrel (higher by $1.17/barrel or 1.1%) on the New York Mercantile Exchange. They earlier surged to $110.2 a barrel, the highest since trading began in 1983. Last week, crude prices ended higher by $3.31 (3.3%).

Crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also lowers oil producers' dollar revenue and forces them to raise prices.

In the currency market today, pressure on the dollar resumed and sent it to a new low against the euro, after stronger-than-expected economic data overshadowed any lingering influence of the Federal Reserve's liquidity-boosting steps. The dollar index, which measures the U.S. currency against a basket of major currencies, fell 1% to 72.41.

EIA reported today that U.S. crude inventories rose 6.2 million barrels to 311.6 million barrels in the week ended 7 March. U.S. gasoline supplies rose by 1.7 million barrels in the latest week, while distillate stocks fell by 1.2 million barrels.

EIA also reported that U.S. refineries operated at 85% of their operable capacity last week, down from the previous week's 85.9%. U.S. crude oil imports averaged 10.5 million barrels a day last week, up 1.1 million barrels a day from the previous week.

Brent crude oil for April settlement today rose $1.02 (1%) to $106.27 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.

Heating oil surges above $3 for first time

Natural gas in New York closed above $10 per million British thermal units for a third day as investors in commodities sought a hedge against a declining dollar and crude oil surged to a record. Natural gas for April delivery rose 1.1 cents to settle at $10.011 per million Btu.

Against this backdrop, April reformulated gasoline rose slightly to $2.7286 a gallon, and April heating oil surged to close at $3.0244 a gallon, up 2.87 cents.

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

The International Energy Agency, cut its forecast for 2008 global oil demand for a second month as record prices curbed consumption in some parts of the world. The agency reduced its forecast by 80,000 barrels a day to 87.54 million barrels a day, leaving annual demand growth at 2%.

OPEC left production targets unchanged on its 5 March meeting at Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day.

At the MCX, crude oil for March delivery closed at Rs 4,399/barrel, higher by Rs 49(1.1%) against previous day’s close. Natural gas for March delivery closed at Rs 403.1/mmtbu, higher by Rs 1.6/mmtbu (1.4%).