Crude loses almost $3

Rise in natural gas inventory pressures crude price

After three consecutive sessions of rise, crude oil prices ended lower on Thursday, 28 August, 2008 at Nymex. Strong dollar and increase in natural gas inventory led to softer crude prices today. Crude oil also fell more than $2 a barrel after the International Energy Agency said it would tap strategic stockpiles if Tropical Storm Gustav disrupts energy production in the Gulf of Mexico.

Crude-oil futures for light sweet crude for October delivery closed at $115.59/barrel (lower by $2.56 or 2.2%) on the New York Mercantile Exchange. 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 61% higher than a year ago. Prices reached a high of $147 on 11 July but have dropped 22% since then.

Paris based, IEA had coordinated a stockpile release among its 27 members to counteract U.S. supply losses after the hurricanes in 2005. That response included the release of European gasoline supplies for shipment to the U.S., as well as crude oil and other refined products. Hurricane Gustav picked up steam as it poured heavy rains on Jamaica on Thursday, and residents along the Gulf Coast started readying for potential landfall.

The Energy Department reported yesterday 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 Thursday, the dollar rebounded against the euro after a report showed the U.S. economy expanded in the second quarter faster than previously estimated and crude-oil prices fell. The dollar index, a measure of the greenback against a trade-weighted basket of currencies, was up 0.1%. The index fell previously in morning trading.

In a monthly report issued by the EIA earlier this week, 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 13% till date.

Against this background, October-reformulated gasoline closed at $3.0214 a gallon, down 4.6 cents, and October heating oil finished at $3.1826 a gallon, down 7.9 cents.

Natural gas plunged as much as 10% in New York, the most in a year, after U.S. supplies rose nearly twice the average for this time of year, easing concern a storm approaching the Gulf of Mexico will idle production. EIA reported today that inventories advanced 102 billion cubic feet in the week ended 22 August to 2.757 trillion cubic feet, the largest increase since 11 July. Tumbling gas prices caused oil to slip

At the MCX, crude oil for September delivery closed at Rs 5,08/barrel, lower by Rs 60 (1.2%) against previous day’s close. Natural gas for September delivery closed at Rs 348.7/mmbtu, lower by Rs 24.4/mmbtu (6.5%).