Crude witnesses a deep plunge

Prices slip by more than $3 as supply related concerns ease

Crude prices dropped by more than $3 today, Tuesday, 29 April, as supply concerns eased. BP restarted a North Sea oil pipeline and the dollar strengthened, reducing the appeal of commodities to investors. Gloomy economic news in the U.S. and forecasts that U.S. crude inventories have gained for a second week also weighed on Tuesday's oil prices. Yesterday, prices had touched an all time high of $119.93 during intra day trading.

Crude-oil futures for light sweet crude for June delivery closed at $115.63/barrel (lower by $3.12/barrel or 2.6%) on the New York Mercantile Exchange. It fell to an intraday low of $114.95 earlier. For the year, crude is up by 19.4% till date. Oil increased 77% in the past year as supply failed to keep up with surging demand in China, India and the Middle East.

As per BP, it expects to resume normal throughput at its 700,000 barrel-a-day Forties crude oil pipeline system in the North Sea within several days. The company closed the Forties Pipeline System, carrying 40% of the U.K.'s oil production, after a strike at the Grangemouth refinery in Scotland cut power supplies.

In the currency market today, the U.S. currency headed for its first monthly advance this year against the euro as traders increased bets the Fed will stop lowering bank-borrowing costs after cutting the benchmark federal funds rate by 25 basis points tomorrow. The Federal Reserve's interest-rate meeting begins Tuesday afternoon. The statement will be released on Wednesday at 2:15 p.m. E.T. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, gained 0.3% to 72.83.

Brent crude oil for June settlement today fell $3.31 (2.8%) to $113.43 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 advances 45% this year

Natural gas declined as crude oil fell from a record and the dollar strengthened against the euro. Gas for June delivery fell 48.7 cents (4.3%) to settle at $10.842 per million British thermal units,

Against this backdrop, June reformulated gasoline fell 9.15 cents to $2.9392 a gallon and June heating oil dropped 5.23 cents to $3.2465 a gallon.

Traders anticipated today that an Energy Department report tomorrow will probably show that U.S. crude-oil supplies advanced 950,000 barrels in the week ended 25 April.

At the pump at USA, retail regular gas averaged $3.607 a gallon, a new record high. Average gas prices in San Francisco surpassed $4 a gallon for the first time.

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 4,664/barrel, lower by Rs 94 (1.9%) against previous day’s close. Natural gas for July delivery closed at Rs 441.2/mmbtu, lower by Rs 16.4/mmbtu (3.6%).