Crude gains for third straight day

Prices give up most of their gains but still end modestly higher

Crude oil prices ended higher on Wednesday, 27 August, 2008 at Nymex thereby registering increase for the third straight day. Prices rose on concerns that tropical Storm Gustav formed in the Caribbean Sea will disrupt oil production at Gulf of Mexico. Energy Department’s weekly inventory report on crude and crude oil products also had their effects on the crude prices.

Crude-oil futures for light sweet crude for October delivery closed at $118.15/barrel (higher by $1.88 or 1.6%) on the New York Mercantile Exchange. Prices rose to a high of $120. Last week, crude prices ended higher by 0.6%. Crude had lost $15.92 (11%) in July, 2008, the biggest ever single day drop in dollars. Prices are 64% higher than a year ago. Prices reached a high of $147 on 11 July but have dropped 20% since then.

The Energy Department reported today that crude supplies fell by 100,000 barrels to 305.8 million for the week ended 23 August. Motor gasoline supplies also fell, down by 1.2 million barrels in the latest week to 195.4 million barrels. They've fallen a total of 21.7 million barrels in the past five weeks. As for distillates, inventories remained unchanged for the week at 132.1 million barrels.

At the currency markets on Wednesday, the dollar traded lower against the euro. A further spike in oil prices amid worries over the potential impact of Tropical Storm Gustav on the Gulf of Mexico triggered profit-taking on the U.S. dollar. Gains in the dollar, however, shrank after the Commerce Department reported orders for U.S.-made durable goods surged in July. The dollar index, which tracks the value of the greenback against other major currencies, slid 0.1%.

In a monthly report issued by the EIA yesterday, it said that total crude oil and products supplied, which is a good indication of domestic consumption, was at around 19.553 million barrels per day in June of this year. That was down from 20.737 million barrels per day a year earlier.

Crude prices had 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%. For the year, crude is up by 15% till date.

Against this background, reformulated gasoline for October delivery rose 9.8 cents to close at $3.0672 a gallon while October-dated heating oil gained 5.2 cents to end at $3.2617 a gallon.

Natural gas for September delivery rose 11.6 cents (1.4%) to settle at $8.394 per million British thermal units in New York.

At the MCX, crude oil for September delivery closed at Rs 5,140/barrel, higher by Rs 36 (0.7%) against previous day’s close. Natural gas for September delivery closed at Rs 373.1/mmbtu, higher by Rs 2.6/mmbtu (0.7%).