Crude ends marginally lower after nearing $140

Chances of increased production at Saudi Arabia in coming month put pressure on price

Crude prices retreated back after nearing $140/barrel today, Monday, 16 June, 2008. Couple of factors continued to weigh on crude prices. Chance of an increase in output at Saudi Arabia was the main reason. Temporary shutdown of an oil platform in the North Sea and weakness in the U.S. dollar had earlier pushed up crude prices.

Crude-oil futures for light sweet crude for July delivery today closed at $134.61/barrel (lower by $0.25/barrel or 0.02%) on the New York Mercantile Exchange. Earlier it rose to $139.89/barrel.

Last week, crude prices closed lower by 2.7%. For the year, crude is up by 38.2% till date. Prices are 98% higher on a yearly basis.

Saudi Arabia has called a meeting for 22 June in Jeddah to help stabilize prices. It was also reported today that the kingdom will produce 9.7 million barrels of oil a day next month, an increase of 200,000 barrels from June's level.

Also, as per reports, Norwegian oil company StatoilHydro said during the weekend that it will shut down oil production at a North Sea platform after a fire broke out.

At the currency markets on Monday, the U.S. dollar fell against most of its major rivals after a meeting of the Group of Eight finance ministers in Japan focused more on inflation than on currencies, deflating expectations of a strong statement of support for the U.S. currency.

Also weighing on the greenback was a report showing that manufacturing in the New York region contracted in June. The Empire State survey index fell to negative 8.7 this month from negative 3.2 in May, indicating the industry is contracting. The dollar index , which tracks the performance of the greenback against a basket of other major currencies, was off 0.6% at 73.62.

Previous to today, oil prices had shot higher by almost $11 a barrel on Friday, 06 June, 2008 scoring their biggest one-day gain in dollar terms as talk about a potential Israeli attack on Iran combined with a slide in the U.S. dollar. Prices had touched an all time high of $139/barrel but closed at $138.5. That was an all-time closing high.

Brent crude oil for June settlement today fell $0.40 (0.3%) to $134.71 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 advanced to a 29-month high after the dollar declined the most against the euro in more than a week. Natural gas for July delivery advanced 30.8 cents (2.4%) to settle at $12.933 per million British thermal units.

Against this backdrop, July reformulated gasoline closed down 2.21 cents at $3.4379 a gallon after climbing as high as $3.53 earlier, while July heating oil fell 1.26 cents to end at $3.8274 a gallon.

Organization of the Petroleum Exporting Countries (OPEC) reported last week that demand for crude from the OPEC Countries in 2007 averaged an estimated 32 million barrels per day, up 260,000 barrels per day from the previous year. But in 2008, demand for OPEC crude is expected to average 31.8 million barrels per day, down 130,000 barrels from 2007.

The cartel also aid it expects global oil demand to grow to 86.88 million barrels per day for 2008, up 1.28% from 2007's demand of 85.78 million, but down from the estimate of 86.95 million it forecasted in the previous month.

At the MCX, crude oil for July delivery closed at Rs 5,762/barrel, lower by Rs 10 (0.2%) against previous day’s close. Natural gas for June delivery closed at Rs 552.6/mmbtu, higher by Rs 10.7/mmbtu (2%).