Crude prices shoot up by more than $5

Inventory report shows that crude supplies fell for fourth week in a row

The weekly inventory report by the Energy Department took crude prices higher today, Wednesday, 11 June, 2008. prices rose by more than $5 today after Energy Department’s report showed that crude inventories slipped for the fourth week in a row. A lower dollar also helped in pushing crude prices higher.

Crude-oil futures for light sweet crude for July delivery today closed at $136.38/barrel (higher by $5.07/barrel or 3.9%) on the New York Mercantile Exchange. Earlier it rose to a high of $138.3/barrel during the day.

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.

The EIA reported today 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.

EIA also reported that supplies of petroleum products climbed as declines in demand offset an unexpected decrease in refinery activity last week. Motor gasoline supplies rose 1 million barrels to stand at 210.1 million barrels and distillate stocks were up 2.3 million barrels at 114 million barrels.

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.

At the currency markets on Wednesday, the dollar fell against the euro on speculation the European Central Bank will raise interest rates in the next month, widening the gap in borrowing costs with the U.S. The dollar has gained 2% against the euro in the previous two sessions. The dollar index, which tracks the greenback against a basket of six major currencies, fell 0.6% to 73.19.

Brent crude oil for June settlement today rose $4 (3.1%) to $135.02 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 consumption to rise 2.2% in 2008

Natural gas in New York advanced amid speculation supply gains will be below average for the week because a heat wave spurred demand and as crude oil surged. Natural gas for July delivery rose 22.5 cents (1.8%) to settle at $12.66 per million British thermal units. Futures earlier touched $12.779 and have gained 70% since beginning of this year.

Against this backdrop, July reformulated gasoline rose 15 cents to close at $3.47 a gallon on Nymex, with July heating oil ahead 16 cents to finish at $3.97 a gallon. Both closed more than 4% higher for the session.

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%.

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 5,894/barrel, higher by Rs 234 (4.1%) against previous day’s close. Natural gas for June delivery closed at Rs 543/mmbtu, higher by Rs 9.3/mmbtu (1.7%).