Crude registers strong monthly drop in prices

Prices give up most of its yesterday’s gains on weak economic data

Crude prices gave up most of its yesterday’s gains today, Thursday, 31 July, 2008 as a pack of economic data on Wall Street disappointed investors rising questions about the demand for crude for the world’s No 1 consumer of oil in the coming days. With today’s drop, crude also registered substantial drop in price for the month of July, 2008.

Crude-oil futures for light sweet crude for September delivery closed at $124.08/barrel (lower by 2.69/barrel or 2.1%) on the New York Mercantile Exchange. Futures earlier fell to an intraday low of $122.71 a barrel. Crude lost $15.92 (11%) this month, the biggest ever in dollars. Last week, prices coughed up $6.5 (4.8%). It's now 16% lower than the $147.27 record high hit last on 10 July, 2008.

According to the latest economic data, the U.S. economy expanded 1.9% in the second quarter, which is less than the expected 2.3% gain. The report also showed a recession may have begun in the final three months of 2007, as gross domestic product was revised to show a contraction in the period.

Also, jobless claims also came in worse than expected. For the week ending 26 July, jobless claims climbed 44,000 to 448,000. That marked the third time in the last five weeks claims have surpassed 400,000. Continuing claims rose 6.0% to 3.282 million, while the four-week moving average jumped to 393,000 from 382,000.

Yesterday, EIA reported today that crude supplies fell by 100,000 barrels to 295.2 million barrels for the week ended 25 July. EIA also reported that as for the oil products, motor gasoline supplies dropped by 3.5 million barrels to 213.6 million last week following a total climb of more than 8 million barrels between the weeks ended 27 June and 18 July. Distillate inventories, which include heating oil, were up 2.4 million at 130.5 million.

The increase in gasoline supplies came even as demand for motor gasoline stood at an average of about 9.4 million barrels per day over the past four weeks, down 2.4% from the same time a year ago.

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 59% higher than a year ago. For the year, crude is up by 30% till date.

Against this background, September reformulated gasoline fell 3% to $3.07 a gallon and September heating oil futures dropped 2.4% to $3.46 a gallon today.

Natural gas in New York fell, posting the biggest monthly decline in more than five years, after a U.S. government report showed inventories increased and crude oil declined. Natural gas for September delivery fell 12.9 cents (1.4%) to settle at $9.119 per million British thermal units. Gas futures slid 32% this month as crude too slipped.

EIA reported today that natural gas supplies rose 65 billion cubic feet in the week ended 25 July, above the average change of 55 billion for this time of year over the last five.

At the MCX, crude oil for August delivery closed at Rs 5,278/barrel, lower by Rs 69 (1.3%) against previous day’s close. Natural gas for August delivery closed at Rs 388.3/mmbtu, lower by Rs 4.2/mmbtu (1.07%).