Crude on a rolling spree

Prices hit another new all time high as weekly report counters expectation for second straight time


Crude prices rose to record highs today, Wednesday, 16 April, 2008 as the weekly inventory report by the Energy Department countered expectation and also as the dollar fell to new lows against the euro due to mixed economic reports. The Energy Department reported that crude inventories fell unexpectedly last week while market was expecting a build up.

Crude-oil futures for light sweet crude for May delivery closed at $114.93/barrel (higher by $1.14/barrel or 1%) on the New York Mercantile Exchange. Prices touched $115.07/barrel during intra day trading. Yesterday also crude rose by more than $2 due to supply disruptions at Mexico and Nigeria. Last week, prices touched a high of $112.21 during intra day trading. Today’s closing price was a new all-time record for crude prices. Crude prices are 85% higher on a yearly basis. For the year, crude is up by 18% till date.

EIA reported today that crude inventories fell unexpectedly, down 2.3 million barrels to 313.7 million barrels in the week ended 11 April 11. Traders expected an increase of 1.5 million barrels. This is the second week crude-inventories data countered expectations.

EIA also reported gasoline supplies fell by 5.5 million barrels in the latest week, while distillate stocks rose by 100,000 barrels.

In the currency market today, the dollar remained under pressure against most major counterparts, notching a fresh low against the euro after mixed U.S. economic data. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 1% to 71.30.

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 eats into oil producers' dollar-denominated revenue and forces them to raise prices.

Brent crude oil for May settlement today rose $1.2 (1.2%) to $112.5 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 futures 39% higher this year

Natural gas in New York gained and natural gas for May delivery rose 22.8 cents (2.2%) to settle at $10.433 per million Btu. Futures are 39% higher so far this year.

Against this backdrop, May reformulated gasoline rose 5.8 cents to $2.939 a gallon and May heating oil fell slightly to $3.283 a gallon.

In its monthly report yesterday, The Organization of Petroleum Exporting Countries left its forecast for 2008 oil demand at 86.97 million barrels a day, a 1.2 million barrel-a-day gain over 2007.

At the pump, the average U.S. retail gasoline prices rose to a new high of $3.386 a gallon, up 1.3 cent from the day before and well ahead of the month-ago price of $3.285 a gallon.

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 April delivery closed at Rs 4,547/barrel, higher by Rs 16 (0.35%) against previous day’s close. Natural gas for April delivery closed at Rs 417.2/mmbtu, higher by Rs 10.4/mmbtu (2.4%).