Crude retreats for first time in seven days

Crude prices fall by more than a dollar after rising more than 8% last week

For the first time in seven days, crude-oil futures fell today, Monday, 12 May, 2008. Prices fell amid signs that rising prices may curb demand in emerging markets. It might be noted that crude prices touched a new high on all the individual days of last week that ended on Friday, 9 May. Weaker dollar and tensions regarding overall global supplies were the main reasons to push crude prices higher. Prices for crude oil have been hovering around $125 against a backdrop of disruptions to oil production in Nigeria.

Crude-oil futures for light sweet crude for June delivery today closed at $124.23/barrel (lower by $1.73/barrel or 1.4%) on the New York Mercantile Exchange. Price touched a high of $126.4 earlier during the day. In the past six sessions, crude prices had gone up by almost $13.5 (11.7%).

Last week, crude prices ended higher by 8.8%. For the year, crude is up by 27.2% till date.

Rising energy demand in China and India has contributed to a doubling in oil's price the past year. But recent reports showed that China's oil imports declined in April as crude costs prompted refiners to cut demand. Also, India's industrial production grew at the slowest pace since 2002. These factors hinted that higher crude prices might deter demand further in the coming months.

On the currency markets on Monday, the dollar rose against some of its currency rivals in the aftermath of a weekend Wall Street Journal report that U.S. officials are attempting to put a floor under the greenback. The U.S. dollar index fell to 72.950, down from 73.058 earlier last week.

Brent crude oil for June settlement today fell $2.5 (2%) to $122.91 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.

No emergency meeting for OPEC

Natural gas in New York dropped amid speculation inventories will increase as a major pipeline in the Gulf of Mexico resumes output following repairs and after crude oil fell from a record. Natural gas for June delivery slid 23.6 cents (2.1%) to settle at $11.301 per million British thermal units. Futures have gained 51% so far this year.

Against this backdrop, June reformulated gasoline closed down 4 cents at $3.16 a gallon and June heating oil shed 8 cents to end at $3.56 a gallon.

EIA reported last week that global oil consumption will likely grow by 1.2 million barrels per day this year, but the consumption of liquid fuels and other petroleum is expected to decline by around 190,000 barrels per day because of the economic slowdown and high petroleum prices. The EIA also expects regular gasoline prices to average $3.52 per gallon this year, up 71 cents from a year ago.

Today, it was reported that United Arab Emirates energy minister Mohammed al-Hamli said that OPEC has no plans for an emergency meeting ahead of its next scheduled gathering in September. Many were speculating about an OPEC emergency meeting due to crude’s sudden surge.

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 5,250/barrel, higher by Rs 11 (0.2%) against previous day’s close. Natural gas for July delivery closed at Rs 480.4/mmbtu, lower by Rs 2.1/mmbtu (0.4%).