Crude on record highs again

Price almost kisses the $110 mark as dollar remains under pressure on Fed comments

Crude prices shot up once again today, Tuesday, 11 March, 2008. Prices rose after the dollar remained under pressure after Federal Reserve Chairman said that Fed is making efforts to alleviate increasing strains in financial markets that are curtailing credit available to homeowners and companies. 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 $108.75/barrel (higher by $0.85/barrel or 0.8%) on the New York Mercantile Exchange. They earlier surged to $109.72 a barrel, the highest since trading began in 1983. Last week, crude prices ended higher by $3.31 (3.3%).

In the currency market today, the dollar gained against the other major currencies, after the Federal Reserve announced it was taking coordinated steps with other central banks to boost liquidity in financial markets. The dollar index, which measures the U.S. currency against a basket of major currencies, gained 0.4%.

Brent crude oil for April settlement today rose $1.09 (1.1%) to $105.25 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.

IEA cuts 2008 global oil demand for a second month

Natural gas declined after touching the highest level in more than two years on speculation crude oil's gains may be finished for now. Gas for April delivery fell 2.4 cents (0.2%) to settle at $10 per million British thermal units.

Against this backdrop, April reformulated gasoline gained 1.12 cents to $2.7261 a gallon, and April heating oil lost 2.23 cents to $2.9957 a gallon.

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 4,350/barrel, higher by Rs 4(0.09%) against previous day’s close. Natural gas for March delivery closed at Rs 401.5/mmtbu, lower by Rs 1.8/mmtbu (0.4%).