Crude glides up further

Price settles above $105 for the first time in history since trading began

Crude prices shot up further today, 06 March, Thursday after dollar fell to new lows against the euro and after Energy Department reported a an unexpected drop in crude inventories for last week. Prices had shot up by more than $5 yesterday itself. Energy prices have surged over the past year as the dollar plunged, prompting investors to seek a hedge against inflation.

Crude-oil futures for light sweet crude for April delivery today closed at $105.47/barrel (higher by $0.95/barrel or 0.9%) on the New York Mercantile Exchange. Prices are 74% higher than a year ago. The contract was trading in the intraday range of $105.97 and $99.88 in the volatile session.

In the currency market today, the dollar index, which tracks the performance of the greenback against other major currencies, dropped 0.7% to 72.96. The euro rose to a record against the dollar after European Central Bank President said there is strong upward pressure on inflation. Market took it as a hint that he will not soon cut interest rates.

Yesterday, EIA reported today that crude inventories fell for the first time in eight weeks, dropping 3.1 million barrels to stand at 305.4 million barrels for the week ended 29 February. Inventories had gained about 25 million barrels this year. U.S. refineries operated at 85.9% of their operable capacity last week, up from the previous week's 84.7%.

Brent crude oil for April settlement today rose $0.97 (1%) to $102.61 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 remains unchanged even as inventories decline

Natural gas was little changed as crude oil surged above $105 a barrel and a government report showed inventories declined more than average for this time of year. Gas for April delivery rose 0.1 cent to settle at $9.742 per million British thermal units.

EIA reported today that stockpiles were at 1.484 trillion cubic feet in the week ended 29 February, 63 billion cubic feet higher than the average amount over the past five years.

Against this backdrop, April reformulated gasoline gained 2.11 cents to $2.6532 a gallon and April heating oil gained 3.02 cents to $2.9733 a gallon.

Yesterday, OPEC members agreed to hold production steady at a meeting in Vienna.

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

At the MCX, crude oil for March delivery closed at Rs 4,179/barrel, higher by Rs 12(0.3%) against previous day’s close. Natural gas for March delivery closed at Rs 391.6/mmtbu, lower by Rs 0.3/mmtbu (0.07%