Crude falls deepest in 17 years!

Prices witness the greatest one day drop in seventeen years

Crude oil prices witnessed the maximum one day fall in seventeen years today, Tuesday, 15 July, 2008. Prices plunged among overall concerns regarding growth in US and worldwide. Also, the Organization of the Petroleum Exporting Countries lowered its forecast for world oil-demand growth for 2008 and 2009 today. Prices witnessed considerable volatility throughout the day.

Crude-oil futures for light sweet crude for August delivery today closed at $138.74/barrel (lower by $6.44/barrel or 4.4%) on the New York Mercantile Exchange. It rose by $1 earlier in the day but then fell $9.3 to an intraday low of $135.92 in overnight electronic trading. Last week, prices gained $0.21 (0.2%).






Crude prices gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. Prices are 105% higher than a year ago. For the year, crude is up by 45% till date.

In the Wall Street today, Federal Reserve Chairman Ben Bernanke said that the U.S. economy is facing "significant" risks to growth, while the Organization of the Petroleum Exporting Countries lowered its forecast for world oil-demand growth for 2008 and 2009.

OPEC issued its monthly report today, lowering its forecast for world oil-demand growth for 2008 to 1.03 million barrels a day, which represents a decline of 70,000 barrels from its previous estimate. Global oil demand this year is expected to average 86.81 million barrels a day. Earlier this month, the Energy Information Administration projected that U.S. petroleum consumption will shrink by 400,000 barrels a day in 2008, 38% more than EIA's June projection of a decline of 290,000 barrels.

At the currency markets on Tuesday, the dollar got some support from falling crude-oil futures but remained under pressure retreating after Bernanke cited downside risks to economic growth in a speech that followed a spate of lackluster data. The dollar dropped to a new low against the euro earlier, before Bernanke spoke on Capitol Hill. The dollar index which measures the greenback against a basket of six major currencies, fell 0.4% to 71.73.

Against this backdrop, August reformulated gasoline tumbled 20 cents, or 5.6%, to $3.38 a gallon, and August heating oil lost 14 cents, or 3.4%, to $3.92 a gallon. August natural-gas futures fell 48.2 cents, or 4%, to $11.48 per million British thermal units.

At the MCX, crude oil for July delivery closed at Rs 5,964/barrel, lower by Rs 242 (3.9%) against previous day’s close. Natural gas for July delivery closed at Rs 493.7/mmbtu, lower by Rs 18.2/mmbtu (3.7%).