Drastic drop in crude price for second straight day

Prices give up more than $9 in two straight sessions

Crude prices fell for the second straight day today, Tuesday, 8 July, 2008 and today’s drop was the maximum in almost four month’s time. Prices dropped by more than $6 earlier in the day today but then pared some of their losses and closed lower by more than $5 at the end. The stronger dollar affected crude prices.

Crude-oil futures for light sweet crude for August delivery today closed at $136.04/barrel (lower by $5.33/barrel or 3.8%) on the New York Mercantile Exchange. Prices fell by almost $6.23 to $135.14 during intraday trading. Crude has dropped $9.25 over two straight sessions. Last week, prices gained $5.08 (3.6%).

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 101% higher than a year ago. For the year, crude is up by 40% till date.

At the currency markets on Tuesday, crude-oil futures tumbled more than $5 a barrel, suffering the biggest one-day loss in almost four months and contributing to a two-day decline of more than $9 a barrel, as the rising dollar and economic worries spurred another broad sell-off in commodities. Crude oil for August delivery closed at $136.04 a barrel on the New York Mercantile Exchange, down 3.8%, or $5.33. Earlier it slumped $6.23 to an intraday low of $135.14 a barrel. Crude has dropped $9.25 over two straight sessions.

In a monthly report, EIA reported today that U.S. petroleum consumption will shrink by 400,000 barrels a day in 2008, nearly 40% more than EIA's June projection of a decline of 290,000 barrels. The change was based on prospects for a weak economy and record high crude oil and product prices extending into 2009.

The EIA also reported that global oil consumption will grow by 900,000 barrels a day in 2008, as demand growth in developing countries will more than offset declines in the U.S. and other developed countries. The EIA projected that crude-oil prices will average $127 per barrel in 2008 and $133 per barrel in 2009.

Against this backdrop, August reformulated gasoline fell 3.4% to $3.363 a gallon and August heating oil dropped 3.8% to $3.82 a gallon. August natural-gas futures fell 44 cents, or 4.7%, to $12.368 per million British thermal units.

At the MCX, crude oil for July delivery closed at Rs 5,906/barrel, lower by Rs 254 (4.1%) against previous day’s close. Natural gas for July delivery closed at Rs 539.5/mmbtu, lower by Rs 27.1/mmbtu (4.8%).