Crude turns volatile

Crude inventories register highest weekly gain in seven years

Crude oil prices were quite volatile on rose on Wednesday, 20 August, 2008 at Nymex. Prices rose higher earlier during the day. But they gave up most of their gains once the weekly inventory report by the Energy Department hit the wires. At the end, prices closed modestly higher.

Crude-oil futures for light sweet crude for September delivery closed at $114.98/barrel (higher by $0.45 or 0.4%) on the New York Mercantile Exchange. 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 62% higher than a year ago. Prices reached a high of $147 on 11 July but have dropped 21% since then.

The September contract expired today. The more-active October contract increased $1.02 (0.9%) to settle at $115.56 a barrel.

As per the weekly report issued by the Energy Information Administration (EIA) wing of the Energy Department, crude supplies rose by 9.4 million barrels to 305.9 million for the week ended 15 August, 2008. Market was expecting a build up of just 1 million barrels. It was the highest weekly buildup of crude in almost seven years. Refinery utilization was at 85.7% compared with 85.9% of capacity a week earlier.

EIA also reported that motor gasoline supplies fell by 6.2 million barrels to 196.6 million barrels during the week. Distillate stocks were up 500,000 barrels at 132.1 million barrels. The gasoline decrease was almost twice the expected decrease. Following the news, crude prices retreated giving up much of their earlier gains. September crude was up $1.35 at $115.88 a barrel at Nymex. Before that, crude was trading as much as higher at $116.7/barrel, up by more than 2%.

At the currency markets on Wednesday, the dollar gained as much as 0.7% against the euro after losing almost that amount in the previous two days. Worries about growth outside the U.S. allowed the dollar to rebound on Wednesday, sending the euro back toward six-month lows against the greenback and lifting the U.S. unit against most major counterparts. The dollar index, which measures the greenback against a trade-weighted basket of currencies, rose to 76.92 from 76.746 in the previous day.

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.

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 17% till date.

Brent crude oil for October settlement rose $1.11 (1%) o close at $114.36 a barrel.

Against this background, September reformulated gasoline rose by 4.6 cents to close at $2.9103 a gallon, and September heating oil added 4 cents to end at $3.1635 a gallon.

Natural gas in New York rose amid concern a storm will develop and crimp Gulf of Mexico production and as demand increases when electricity plants begin fall maintenance. Natural gas for September delivery rose 10.1 cents (1.3%) to settle at $8.077 per million British thermal units. Futures are 8% higher this year and have declined 41% since closing at $13.577 3 July, 2008, a 30-month high.

At the MCX, crude oil for September delivery closed at Rs 4,985/barrel, higher by Rs 5 (0.1%) against previous day’s close. Natural gas for August delivery closed at Rs 351.3/mmbtu, lower by Rs 0.1/mmbtu (0.02%).