Crude zooms again

Prices rise more than $5 in a single day as the dollar weakens

Crude oil prices gained more than what they had lost in the previous two days as prices rallied and marked their largest one day gain in a long time today, Thursday, 04 June, 2008. A lower dollar prompted this sharp rise in crude price today. Crude has dropped $5.46 in the past two days and rose today by $5.49.

Crude-oil futures for light sweet crude for July delivery today closed at $127.79/barrel (higher by $5.49/barrel or 4.5%) on the New York Mercantile Exchange. Prices haven't scored a gain anywhere near that large in a single day since at least 5 March of this year, when they climbed $5.

Last week, crude prices closed lower by 3.7%. Previously during the month of May, 2008 prices had touched an all time high of $135.09. For the year, crude is up by 32.5% till date. Prices are 95% higher on a yearly basis. .

At the currency markets on Thursday, the dollar came under severe pressure, especially against the euro, after European Central Bank President Jean-Claude Trichet said a small increase in interest rates next month is possible. The dollar index, which tracks the greenback against a basket of six major currencies, was at 73.054, down from 73.469.

Yesterday EIA announced that crude supplies dropped by 4.8 million barrels to 306.8 million for the week ended 30 May. As per the data, supplies have fallen a total of 19 million barrels in three weeks.

But refinery utilization was up 1.8% at 89.7% of capacity compared with 87.9 % a week earlier. The increase prompted a rise in petroleum products. As per EIA, motor gasoline supplies rose 2.9 million barrels to 209.1 million barrels and distillate stocks were up 2.3 million barrels at 111.7 million barrels.

Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.

Natural gas higher by 67% on a yearly basis

Natural gas in New York rose amid a forecast for the warmest weather so far this year in the largest energy-consuming regions and as crude oil surged. Natural gas for July delivery rose 14 cents (1.1%) to settle at $12.519 per million British thermal units. Futures are 67% higher this year.

Against this backdrop, prices for July reformulated gasoline closed at $3.3345 a gallon, up 13.45 cents, after dropping 4.5% in the previous session. July heating oil finished at $3.6808 a gallon, up 13.1 cents.

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 June delivery closed at Rs 5,374/barrel, higher by Rs 125 (2.4%) against previous day’s close. Natural gas for June delivery closed at Rs 533.5/mmbtu, higher by Rs 3.7/mmbtu (0.7%).