Crude price eases a bit

Prices drop by more than $2 as traders resort to four day profit booking

Crude-oil futures fell today, Thursday, 22 May, 2008 after the dollar rebounded and the traders resorted to profit booking after four days of massive rise in crude prices. Crude prices had been on a roll since the past few days and had crossed the $133/barrel for the first time yesterday.

Crude-oil futures for light sweet crude for July delivery today closed at $130.81/barrel (lower by $2.3/barrel or 1.8%) on the New York Mercantile Exchange. Price touched a high of $135.09 earlier during the day.

In the past four sessions, crude prices had gained more than 7%. Last week, crude prices closed higher by 29 cents. For the year, crude is up by 31% till date. Prices have more than doubled on a yearly basis.

At the currency markets on Thursday, the dollar rose on speculation the Federal Reserve will raise borrowing costs by the end of the year to curb inflation. The dollar also got a lift against major rivals after better-than-expected weekly jobs data. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, rose 0.4% to 72.18.

Among major economic news of the day, the Labor Department reported that first-time claims for state unemployment benefits fell back in the latest week, dropping by 9,000 to 365,000 on a seasonally adjusted basis.

Yesterday, the Energy Department reported that crude supplies fell by 5.4 million barrels to 320.4 million for the week ended 16 May. Prior to that, supplies had climbed more than 12 million barrels in the past four weeks. Market was expecting a rise of 900,000 barrels for the latest week.

EIA also revealed that crude-oil imports averaged 9.2 million barrels per day last week, down 696,000 barrels per day from a week earlier. Meanwhile, refinery utilization rose to 87.9% of capacity from 86.6% a week ago. Still, motor gasoline supplies fell 800,000 barrels to 209.4 million barrels last week. Distillate stocks were up 700,000 barrels at 107.8 million barrels.

Last week, prices kissed $128 for first time after Goldman Sachs raised its forecast on Friday for the average price of West Texas Intermediate oil in the second half of 2008 to $141 a barrel from $107 a barrel. As per the company’s reports, long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth. Credit Suisse Group AG and Societe Generale SA raised their oil price forecasts for 2008 and 2009 citing investor flows and limited supply.

U.S. natural gas inventories last week increased less than analysts forecast

Brent crude oil for June settlement today fell $2.19 (1.7%) to $130.51 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 futures climbed after a government report showed U.S. inventories last week increased less than analysts forecast. Gas for June delivery rose 5.7 cents (0.5%) to settle at $11.697 per million British thermal units.

EIA reported today that stockpiles were 3 billion cubic feet below the five-year average, compared with a 3 billion-cubic-foot surplus a week earlier. Supplies were down 302 billion cubic feet, or 16 percent, from a year earlier.

Against this backdrop, July reformulated gasoline closed at $3.3297 a gallon, down 7.03 cents, while July heating oil futures rose 4.43 cents to end at $3.9543 a gallon in New York after trading at a record high of $4.02 in the electronic trading session.

AAA reported today that regular retail gasoline prices jumped by 2.3 cents to a fresh record of $3.831 a gallon at USA. It's up 9.1% from a month ago.

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 5,661/barrel, higher by Rs 5 (0.08%) against previous day’s close. Natural gas for July delivery closed at Rs 513.1/mmbtu, higher by Rs 9.7/mmbtu (1.9%).