Crude softens partly

Prices drop by a dollar as recession fears lingers

Crude prices fell today, Thursday, 03 April, 2008 as dollar lost steam after certain data related to the job sector pointed out that US might have already hit a recession thereby questioning the crude demand in the coming months.

Crude-oil futures for light sweet crude for May delivery closed at $103.83/barrel (lower by $1/barrel or 1%) on the New York Mercantile Exchange. Prices earlier fell by to $100.44 and rose to a high of $106.5 during intraday trading. Crude prices are 61% higher on a yearly basis. For the year, crude is up by 10% till date. It touched a high of $111.8 on 17 March, 2008 but has slipped thereafter.

In the currency market today, the dollar slipped after data showed first-time applications for state unemployment benefits rose last week to their highest level since mid-September 2005, boding poorly for monthly data scheduled to be released tomorrow. The dollar index, which measures the greenback against a basket of currencies, was at down at 72.164 as against previous day’s 72.240. The dollar has slipped by 6.5% vs the euro till date this year.

As per the job report today, first-time applications for state unemployment benefits rose last week to reach 407,000, their highest level since mid-September 2005.

Yesterday, EIA reported that 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.

Brent crude oil for May settlement today fell $1.2 (1.2%) to $102.52 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 inventories fall for nineteen straight weeks

Natural gas fell after separate government reports showed the economy is slowing and inventories declined less than forecast. Natural gas for May delivery fell 41.5 cents, (4.2%) to settle at $9.417 per million British thermal units. Natural gas has gained 26% so far this year.

EIA reported today that U.S. inventories of gas in storage fell for a 19th straight week. Gas in storage dropped 29 billion cubic feet in the week ended 28 March. At 1.248 trillion cubic feet, stocks were 304 billion cubic feet less than this time last year, but 6 billion cubic feet above the five-year average.

Against this backdrop, May reformulated gasoline dropped 4.93 cents to $2.7243 a gallon, and May heating oil fell 2.82 cents to $2.9228 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 May delivery closed at Rs 4,164/barrel, higher by Rs 50 (1.2%) against previous day’s close. Natural gas for April delivery closed at Rs 381.6/mmbtu, lower by Rs 13.4/mmbtu (3.4%).