Crude price reverses course in late hours

Price ends moderately higher on supply concerns

Crude prices traded lower in the early session today, Thursday, 12 June, 2008 but at the end they reversed their course and ended marginally higher for the day. Prices rebounded on supply concerns and also after Nigeria's president said the country's state-owned oil company will take over operations in the Ogoni district of southern Nigeria from a Royal Dutch Shell joint venture. Yesterday’s weekly inventory report by the Energy Department had taken crude prices higher by more than $5 at one shot.

Crude-oil futures for light sweet crude for July delivery today closed at $136.74/barrel (higher by $0.36/barrel or 0.3%) on the New York Mercantile Exchange. Earlier it fell by almost $4.8/barrel. A key focus in today’s oil movement was also the dollar.

Last week, crude prices closed higher by 8.8%. For the year, crude is up by 40% till date. Prices are 103% higher on a yearly basis.

At the currency markets on Thursday, the dollar gained strength in the belief that a rebound in retail sales would back the case for the Federal Reserve to hike U.S. interest rates. The dollar index which tracks the greenback against major currency rivals, gained nearly 0.9% to 73.88.

The Commerce Department reported today an unexpected 1% rise in retail sales last month, marking the fastest increase in six months.

Yesterday, EIA reported that the nation's crude supplies dropped to 302.2 million barrels, down 4.6 million barrels, for the week ended 6 June. Thus, crude supplies have fallen a total of 23.6 million in four weeks. Refinery utilization was at 88.6% compared with 89.7% of capacity a week earlier.

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 rose $1.07 (0.8 %) to $136.09 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.

Retail gasoline at record high

Natural gas in New York advanced after a government report showed inventories gained less than analysts expected. Natural gas for July delivery rose 13.8 cents (1.1%) to settle at $12.798 per million British thermal units.

Against this backdrop, July reformulated gasoline tacked on 5.6 cents to close at $3.526 a gallon while July heating oil fell 2.73 cents to end at $3.9427 a gallon.

As per EIA, total natural-gas consumption is expected to rise by 2.2% in 2008, with year-over-year increases in residential, commercial and electric power sectors largely weather driven.

Earlier this week, The International Energy Agency (IEA) cut its forecast for global oil demand for a fifth month today as record prices dented consumption. The IEA reduced its 2008 outlook by about 70,000 barrels a day to 86.77 million barrels a day from 86.84 million last month. That leaves demand growth for this year at 0.9%.

AAA reported today that the average retail price for a gallon of regular gasoline stood at a fresh record of $4.06, up 32.9% from a year 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 July delivery closed at Rs 5,803/barrel, lower by Rs 86 (1.5%) against previous day’s close. Natural gas for June delivery closed at Rs 548.7/mmbtu, higher by Rs 5.7/mmbtu (1.04%).