Crude climbs up

OPEC strongly hints at a production cut at tomorrow’s meeting at Vienna

Crude prices rose today, Thursday, 23 October, 2008 and closed at the $68/barrel level as OPEC clearly hinted at a production cut. Last week, OPEC had cut its 2009 demand forecast because of ``dramatically worsening'' conditions in financial markets.

Crude-oil futures for light sweet crude for December delivery closed at $67.84/barrel (higher by $1.09 or 1.6%) on the New York Mercantile Exchange. Prices earlier touched a low of $65.9. Prices reached a high of $147 on 11 July but have dropped almost 53% since then. Last week, prices dropped by 7.5%. On a yearly basis, crude price is lower by 20%. For this year in 2008, crude prices have dropped 32%.

OPEC officials today clearly hinted that OPEC might pare production by 1 million to 2 million barrels a day in stages at tomorrow’s meeting at Vienna to stabilize prices.

The 13 members of OPEC, are expected to cut their oil production quotas in a bid to boost oil prices.

Brent crude oil for December settlement rose $1.40 (2.2%) to settle at $65.92 a barrel on London's ICE Futures Europe exchange.

EIA reported yesterday that crude supplies rose for a fourth week, up 3.2 million barrels for the week ended 17 October, 2008 to stand at 311.4 million. They're up a total of 21.2 million barrels in four weeks. EIA had also reported that motor gasoline supplies also climbed 2.7 million barrels to 196.5 million barrels. They're up 17.8 million barrels in four weeks. And distillate stocks rose for the first time in eight weeks, up 2.2 million barrels to 124.3 million.

The EIA report also showed yesterday that U.S. fuel demand during the past four weeks was down 8.5% from a year ago. The US consumes about one fourth of the total global oil production. Demand for petroleum products over the last four-week period averaged 18.7 million barrels per day.

In the currency market on Thursday, the dollar slipped against major rivals as foreign exchange markets took their cue from volatile equities trading and rising risk appetite as U.S. blue chips managed to end a whipsaw session higher. The dollar index, a measure of the greenback against a trade-weighted basket of six major currencies, was at 85.056, down from 85.602 in late Wednesday.

In the latest monthly prediction, the Organization of the Petroleum Exporting Countries said last week that global oil consumption will grow 550,000 barrels a day this year compared with a year ago, down 330,000 barrels from last month's forecast. Total consumption will stand at 86.5 million barrels a day. For the next year, demand will grow 800,000 barrels a day, down 100,000 barrels from OPEC's September prediction.

The Energy Information Administration, the statistics arm of the U.S. Energy Department, also lowered its growth outlook for this year's global oil consumption by 350,000 barrels from a month ago last week.

For the third quarter of the year crude prices ended lower by 28%. This was the biggest quarterly drop since 1991. Before that, crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. For the month of September, prices registered drop of 13%.

Against this background, November reformulated gasoline closed at $1.5778 a gallon, up 0.7 cent, while November heating oil fell by 0.7 cent to end at $2.0297 a gallon.

Prices for natural gas fell more than 5% after a U.S. government report showed that supplies of the commodity remained above the five-year average. EIA reported today that supplies of natural gas in storage rose 70 billion cubic feet for the week ended 17 October. November natural-gas futures fell 35.8 cents, or 5.3%, to close $6.419 per million British thermal units.

At the MCX, crude oil for November delivery closed at Rs 3,484/barrel, higher by Rs 90 (2.6%) against previous day’s close. Natural gas for November delivery closed at Rs 333.9/mmbtu, lower by Rs 15.6/mmbtu (4.5%).