Crude drops for third straight day

Prices go down further as the dollar makes its way up

Crude prices dropped by almost a dollar today, Thursday, 1 May, as the dollar strengthened against its rivals. The same reduced the commodities’ appeal as a hedge against inflation. Prices also continued to slip for the third straight day after yesterday’s weekly inventory report by the Energy Department showed that crude supplies rose more than forecast.

Crude-oil futures for light sweet crude for June delivery closed at $112.52/barrel (lower by $0.94/barrel or 0.8%) on the New York Mercantile Exchange. Earlier prices slipped to $110/barrel. For the year, crude is up by 16.8% till date.

EIA reported yesterday that U.S. crude oil imports averaged 10.2 million barrels per day last week, up 174,000 barrels per day from the previous week. Traders had anticipated that U.S. crude-oil supplies advanced 950,000 barrels in the week ended 25 April. Crude inventories were boosted by increasing imports. U.S. refineries operated at 85.4% of their operable capacity last week, down 0.2% from the last week.

EIA also reported gasoline supplies fell by 1.5 million barrels in the latest week, while distillate stocks, which include diesel and heating oil, rose by 1.1 million barrels.

In the currency market today, the dollar was solidly higher against most major rivals extending earlier gains after better-than-expected U.S. manufacturing data. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 1% to 73.31.

Against this backdrop, June reformulated gasoline edged down 2.81 cents to $2.8782 a gallon, June heating oil dropped 4.3 cents to $3.1177 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 4,507/barrel, lower by Rs 121 (2.6%) against previous day’s close. Natural gas for July delivery closed at Rs 427.3/mmbtu, lower by Rs 12.2/mmbtu (2.8%).