Prices rise by more than $4 on Energy Department’s crude inventory report
Weak dollar and weekly inventory report by Energy Department for last week showing that crude inventories dropped more than forecast sent crude prices 4% higher today, Wednesday, 26 March, 2008. The dollar slumped due to some discouraging economic data.
Crude-oil futures for light sweet crude for May delivery closed at $105.9/barrel (higher by $4.6/barrel or 4.6%) on the New York Mercantile Exchange. Crude prices are 68% higher on a yearly basis. The crude ended last week lower by more than $7 (6.8%).
In the currency market today, the dollar index, which tracks the value of the greenback against a basket of major currencies, fell 0.5% to 71.726. The dollar came under renewed pressure, especially against the euro, after reports showing resilient business sentiment in the euro zone's two biggest economies. Reports showed German business confidence increased in March.
On the other hand, in the US, new home sales fell to a 13 year low in February and also there was a 1.7% drop in durable good order in USA for February.
A stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, 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.
The EIA reported today that U.S crude stockpiles held steady at 311.8 million barrels in the week ended 21 March. U.S. crude-oil imports averaged about 8.9 million barrels per day last week, down 570,000 barrels per day from the previous week. Refineries operated at 82.2% of their operable capacity last week, down from the previous week's 83.8%.
EIA also reported that U.S. motor gasoline demand averaged about 9.1 million barrels per day last week, or 0.3% below the same period last year. U.S. gasoline supplies fell by 3.3 million barrels in the latest week, while distillate stocks dropped by 2.2 million barrels.
Brent crude oil for May settlement today rose $3.39 (3.4%) to $103.99 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 advanced a fourth day as speculators bought commodities after the dollar weakened against the euro and crude oil surged. Gas for April delivery rose 15.3 cents (1.6%) to settle at $9.572 per million British thermal units.
Against this backdrop, May reformulated gasoline rose 6.39 cents to $2.7349 a gallon and May heating oil rallied 10.57 to $2.9458 a gallon
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
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. Also over the weekend, it was reported that OPEC President Chakib Khelil said oil prices would range between $80 and $110 a barrel for the rest of 2008.
At the MCX, crude oil for May delivery closed at Rs 4,223/barrel, higher by Rs 207 (5.1%) against previous day’s close. Natural gas for April delivery closed at Rs 389/mmtbu, higher by Rs 10.1/mmtbu (2.7%