Crude shoots up

Prices rise as dollar eases and crude supplies register drop in inventories

Crude prices rose today, Wednesday, 02 April, 2008 as dollar lost steam and Energy Department report showed that U.S. supplies of the motor fuel fell a third week. rebounded against its rivals. Market was anticipating that weekly inventory report will show crude inventories rose for the 11th time in 12 weeks as demand weakened and the same did.

Crude-oil futures for light sweet crude for May delivery closed at $104.83/barrel (higher by $3.85/barrel or 3.8%) on the New York Mercantile Exchange. Prices earlier fell by $1 below $100 during intraday trading. Crude prices are 59% higher on a yearly basis. For the year, crude is up by 9% till date. It touched a high of $111.8 on 17 March, 2008 but has slipped thereafter.

As per the inventory report by Energy Department, U.S. crude inventories rose more than expected, up 7.4 million barrels to 319.2 million barrels in the week ended 28 March against an anticipation of increase by more than 2 million barrels. Refineries operated at 82.4% of their operable capacity last week, up slightly from the previous week's 82.2%.

EIA also reported that gasoline supplies fell by 4.5 million barrels in the latest week, while distillate stocks fell by 1.6 million barrels. U.S. crude-oil imports averaged about 10.3 million barrels per day last week, up nearly 1.4 million barrels per day from the previous week.

In the currency market today, the dollar index, which tracks the performance of the U.S. currency against other major currencies, was last down 0.25%. The dollar had firmed earlier after the ADP employment report showed that private sector jobs rose by 8,000 in March. But then it fell in the course of the day. In testimony to Congress, Bernanke said that the outlook for U.S. economic growth has worsened since January and that the possibility of a recession can't be ruled out.

Crude prices are denominated in dollars and 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 revenues, putting them under pressure to raise prices.

Brent crude oil for May settlement today rose $3.58 (3.6%) to $103.75 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.

Gasoline futures rise to record highs as inventories slip

Natural gas in New York advanced on speculation stockpiles fell more than expected for this time of year and as crude oil rose. Natural gas for May delivery rose 10.8 cents ( 1.1%) to settle at $9.832 per million British thermal units.

Against this backdrop, May reformulated gasoline gained 13.44 cents to $2.7736 a gallon and May heating oil rose 7.13 cents to $2.951 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 4,114/barrel, higher by Rs 58 (1.4%) against previous day’s close. Natural gas for April delivery closed at Rs 395/mmtbu, lower by Rs 1.8/mmtbu (0.45%).