Volatile crude ends substantially higher

Prices give up earlier losses as traders digest weekly inventory data

Crude prices ended considerably higher today, Wednesday, 18 June, 2008 after trading lower earlier during the day. Prices rose after traders started digesting the weekly inventory report. The weaker dollar also helped in spurting prices. Price also rose for the first time in four days after a statement that President George W. Bush is not expecting announcements of increased oil production at a 22 June conference in Saudi Arabia.

Crude-oil futures for light sweet crude for July delivery today closed at $136.68/barrel (higher by $2.67/barrel or 2%) on the New York Mercantile Exchange. Earlier it fell to $135.5/barrel.

EIA reported today that crude inventories have now fallen 24.8 million barrels in the past five weeks. Crude supplies dropped by 1.2 million barrels to 301 million for the week ended 13 June. Refinery utilization climbed to 89.3% compared with 88.6% of capacity a week earlier.

EIA also reported that demand for motor gasoline was down 1.8% over the past four weeks, compared to the same period a year ago. It stood at an average of about 9.3 million barrels per day. Motor gasoline supplies fell 1.2 million barrels to 208.9 million barrels for the week ended 13 June. Distillate stocks were up 2.6 million barrels at 116.6 million barrels.

Last week, crude prices closed lower by 2.7%. For the year, crude is up by 39% till date. Prices are 97% higher on a yearly basis.

Saudi Arabia has called a meeting for 22 June in Jeddah to help stabilize prices. It was also reported yesterday 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.

At the currency markets on Wednesday, the dollar headed lower, with traders reconsidering bets that the Federal Reserve will be raising interest rates later this year as economic woes hit stocks on Wall Street. The dollar index which tracks the performance of the greenback against other major currencies, fell 0.1% to 73.44.

Natural gas in New York rose on speculation a government report tomorrow will show supplies gained up to one-third less than average for this time of year. Natural gas for July delivery rose 25.8 cents (2%) to settle at $13.21 per million British thermal units.

At the MCX, crude oil for July delivery closed at Rs 5,814/barrel, higher by Rs 73 (1.3%) against previous day’s close. Natural gas for June delivery closed at Rs 566.9/mmbtu, higher by Rs 15.4/mmbtu (2.8%).