Crude prices rise for first time in three sessions

Natural gas prices tumble more than 5% on more than expected inventory buildup

Crude prices rose for the first time in three sessions today, Thursday, 24 July, 2008. Prices rose after the relatively strong dollar weakened in the late hours. Prices were also supported by tensions in Nigeria, the fifth largest foreign oil supplier to the U.S.

Crude-oil futures for light sweet crude for September delivery closed at $125.49/barrel (higher by $1.05/barrel or 0.8%) on the New York Mercantile Exchange. Earlier in the day, it touched an intra day high of $ 126.5. Before today, prices gave up more than $7 in the past two sessions. Last week, prices coughed up $16.5 (11.2%). It's now 15% lower than the $147.27 record high hit last on Thursday, 10 July, 2008.

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 66% higher than a year ago. For the year, crude is up by 34% till date.

At the currency markets on Thursday, the greenback rallied sharply against the New Zealand dollar, or kiwi, after the Reserve Bank of New Zealand surprised markets by reducing its benchmark interest rate for the first time in five years. The dollar index, a measure of the greenback against a trade-weighted basket of currencies, rose to an intraday high of 73.02 by the close of metals trading, but it recently fell back 0.1% to 72.87.

EIA reported yesterday in its weekly inventory report today that U.S. crude inventories fell less than expected last week and fell 1.6 million in the week ended 18 July. Market expected a figure around 2 million. At 295.3 million barrels, U.S. crude-oil inventories are in the lower half of the average range for this time of year.

As per the report, U.S. crude-oil imports averaged 9.8 million barrels per day last week, down 985,000 barrels per day from the previous week. U.S. refineries operated at 87.1% of their operable capacity last week. The EIA also reported U.S. gasoline supplies rose by 2.9 million barrels in the latest week, and distillate stocks gained by 2.4 million barrels.

EIA data also showed that an economic slowdown is taking toll on energy demand. Over the past four weeks, U.S. motor gasoline demand has averaged 9.3 million barrels per day, down by 2.4% from the same period last year.

Against this background, September reformulated gasoline rose 0.7% to $3.08 a gallon and September heating oil ended at $3.58 a gallon.

EIA reported the latest status in natural gas inventories today. August natural gas futures fell 5.17 to $9.23 per million British thermal units. Earlier it fell more than 8% to an intraday low of $8.88. EIA had reported that U.S. natural gas inventories rose 84 billion cubic feet in the week ended 18 July against an expected buildup of 78 billion cubic feet.

At the MCX, crude oil for August delivery closed at Rs 5,307/barrel, lower by Rs 35 (0.7%) against previous day’s close. Natural gas for August delivery closed at Rs 394.4/mmbtu, lower by Rs 33.6/mmbtu (7.8%).