Crude slips below $115

Natural gas remains the lone gainer in the sector

A strong dollar and overall economic concerns related to the US economy pushed crude prices below the $115/barrel level for the first time in three months. Prices rose above $116 earlier during the day as five days of clashes between Russia and Georgia threatened alternative export routes from Azerbaijan, needed because of a pipeline fire. Crude had lost almost $10 last week too.

Crude-oil futures for light sweet crude for September delivery closed at $115.2/barrel (lower by 4.82 or 4.4%) on the New York Mercantile Exchange. Futures earlier fell to an intraday low of $112.72 a barrel. Last week, crude prices ended lower by $9.9 (8%). Before that crude lost $15.92 (11%) in July, 2008, the biggest ever in dollars.

At the currency markets on Monday, the dollar extended its last week rally against the euro. The dollar index which measures the U.S. dollar against a basket of major currencies, rose to 76.25, up from 75.82 in during last Friday. A combination of factors drove the dollar's rise last week, such as the European Central Bank admitting weakness in the euro-zone economy. The dollar also gained on speculation the economic slowdown that started in the U.S. is spreading.

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 60% higher than a year ago. For the year, crude is up by 18% till date.

Brent crude oil for September settlement fell 66 cents (0.6%) to settle at $112.67 a barrel on London's ICE Futures Europe exchange.

Against this background, September reformulated gasoline closed down 2.1 cents at $2.8666 a gallon, while September heating oil shed 0.9 cent to end at $3.1195 a gallon.

September natural gas futures were the lone gainer in the crude sector today as natural gas in New York advanced as industrial users and utilities bought supplies after the fuel tumbled more than $5 in the past six weeks and forecasts signaled tropical storm development. Natural gas for September delivery rose 10.1 cents (1.2%) to settle at $8.349 per million British thermal units.

At the MCX, crude oil for August delivery closed at Rs 4,765/barrel, lower by Rs 74 (1.5%) against previous day’s close. Natural gas for August delivery closed at Rs 349/mmbtu, lower by Rs 0.7/mmbtu (0.2%).