Crude back over $130

Crude oil prices rise due to inventory speculation

Crude-oil futures rose today on Wednesday, 28 May, 2008 after the dollar strengthened and also as traders continued to speculate regarding tomorrow’s inventory report by the Energy Department. Price also rose today after speculation by Morgan Stanley that Brent crude might soon touch $150/barrel. Last week, crude prices marked a new high almost everyday after traders speculated that crude supplies are not enough to meet the forthcoming hurricane season.

Crude-oil futures for light sweet crude for July delivery today closed at $131.03/barrel (higher by $2.18/barrel or 1.7%) on the New York Mercantile Exchange. Oil climbed as high as $131.58 and fell as low as $125.96 today.

Last week, crude prices closed higher by 5%. Price touched a high of $135.09 earlier during the week. For the year, crude is up by 31.2% till date. Prices have more than doubled on a yearly basis.

At the currency markets on Wednesday, the dollar firmed up after a report showing orders for durable goods fell a milder-than-expected 0.5% in April. The dollar index, which tracks the greenback against a basket of major currencies, was at 72.535, up from 72.389.

Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

Traders are expecting tomorrow’s report to show that crude supplies to have climbed by 750,000 barrels for the week ended 23 May. They also expect a buildup of 800,000 barrels in distillates and an increase of 400,000 barrels in gasoline inventories. The report will come out a day late because of last Monday’s holiday.

Natural gas rises in tandem with crude

Brent crude oil for June settlement today rose $2.62 (2%) to $130.93 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 in New York also advanced as crude rebounded from a one-week low. Natural gas for June delivery advanced 11.5 cents (1%) to settle at $11.916 per million British thermal units. Gas earlier rose as high as $11.975 and fell as low as $11.602. The June contract expired today.

Against this backdrop, June reformulated gasoline added 6.78 cents to close at $3.4476 a gallon, while June heating oil finished at $3.82 a gallon, up 2 cents.

AAA reported today that regular retail gasoline prices jumped to another record of $3.934 a gallon at USA. It's up 23% on a yearly basis.

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 5,595/barrel, higher by Rs 38 (0.7%) against previous day’s close. Natural gas for July delivery closed at Rs 513.7/mmbtu, lower by Rs 3/mmbtu (0.6%).