Crude prices continue to soften

Prices give up earlier gains and end marginally lower

Crude oil prices fell on Monday, 18 August, 2008 at Nymex erasing earlier gains after dollar continued to remain strong and amid signs that tropical storm Fay will miss rigs and platforms in the Gulf of Mexico, which accounts for about a fifth of U.S. production. But crude price got some support as the dollar gave up its earlier gains during the day.

Crude-oil futures for light sweet crude for September delivery closed at $112.87/barrel (lower by 0.90 or 0.8%) on the New York Mercantile Exchange. Earlier during the day, it was trading higher by more than $1 at $115. Last week, crude prices ended lower by 1.2%. Before that crude lost $15.92 (11%) in July, 2008, the biggest ever in dollars. Prices are 57% higher than a year ago. Prices reached a high of $147 on 11 July but have dropped 23% since then.

It was reported today that Royal Dutch Shell and Transocean evacuated some workers as Fay, with maximum winds of about 60 miles an hour, might grow into a hurricane before striking Florida's west coast tomorrow.

At the currency markets on Monday, the dollar started the day on a weak note but then went up strongly against the euro and other major rivals. But then, in course of the day, it lost some ground. The dollar index, which measures the greenback against a basket of currencies, fell 0.1% to 77.07. Earlier in the day, it was at 77.111, up from previous session’s close at 77.080.

In a monthly oil report issued last week, the Organization of the Petroleum Exporting Countries (OPEC) said that oil demand has been "badly hurt" this summer by the slowing economy and high oil prices. Transport and industrial fuels declined the most, sending USA’s total oil demand down by 3.8%, or 0.8 million barrels per day in the first seven months of the year.

OPEC reported that it expects total world oil demand to reach an average of 86.90 million barrels per day for 2008, above 2007's 85.90 million. For 2009, it forecasts a rise of 900,000 barrels per day to average 87.8 million. OPEC members have also been increasing production to help calm the markets. OPEC output in July reached 32.64 million barrels per day, a gain of 780,000 barrels per day since April.

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.

Brent crude oil for October settlement declined 61 cents (0.5%) o close at $111.94 a barrel.

Against this background, September reformulated gasoline fell 4.5 cents to close at $2.8152 a gallon while September heating oil closed at $3.0848 a gallon, down 3.4 cents.

Natural gas in New York fell amid speculation production in the Gulf of Mexico will be little changed by Tropical Storm Fay and as demand waned on a slowing U.S. economy. Natural gas for September delivery fell 20.4 cents (2.5%) to settle at $7.888 per million British thermal units.

At the MCX, crude oil for August delivery closed at Rs 4,952/barrel, higher by Rs 29 (0.6%) against previous day’s close. Natural gas for August delivery closed at Rs 348.3/mmbtu, lower by Rs 2.2/mmbtu (0.62%)