Crude ends modestly lower

Prices drop in the $100 range as dollar continues to strengthen

Crude prices fell modestly lower on Tuesday, 01 April, 2008 as dollar rebounded against its rivals. Prices also softened on signs that tomorrow’s weekly inventory report will show inventories rose for the 11th time in 12 weeks as demand weakened.

Crude-oil futures for light sweet crude for May delivery closed at $100.98/barrel (lower by $0.60/barrel or 0.6%) on the New York Mercantile Exchange. Prices earlier fell to $99.55 during intraday trading. Crude prices are 55% higher on a yearly basis. For the year, crude is up by 5.2% till date. It touched a high of $111.8 on 17 March, 2008 but has slipped thereafter.

In the currency market today, the dollar extended gains gaining more than 2% against the yen as stocks soared after the Institute for Supply Management's manufacturing index unexpectedly inched higher. This calmed the recession fears to a little.

A stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies.

Also traders anticipated that crude-oil supplies increased by more than 2 million barrels for the week ended on 28 March. EIA will report the latest status tomorrow.

Brent crude oil for May settlement today fell $0.13 (0.1%) to $100.17 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 drops by 3.7% after gaining 35% in the first quarter

Natural gas declined as speculators trimmed positions after a recent surge in commodity prices. Natural gas for May delivery fell 37.7 cents (3.7%) to settle at $9.724 per million British thermal units.

Against this backdrop, May reformulated gasoline gained 1.21 cent to $2.6392 a gallon and May heating futures fell 2.64 cents to $2.8797 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 4,056/barrel, higher by Rs 29 (0.72%) against previous day’s close. Natural gas for April delivery closed at Rs 396.8/mmtbu, lower by Rs 2.8/mmtbu (0.7%).