Crude drops to 8 month low

Crude drops to eight month low

Crude oil prices fell to lowest levels in almost eight months today, Monday, 06 October, 2008 after stocks at Wall Street just plunged on overall global economic crisis. Prices softened on overall global energy demand.

Crude-oil futures for light sweet crude for December delivery closed at $87.81/barrel (lower by $6.07 or 6.5%) on the New York Mercantile Exchange. Prices fell to a low of $93.88 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 50% since then. Till date this year, prices are lower by 8.5%.

At Wall Street today, The Dow Jones Industrial Average fell as much as 800 points to trade below the 10,000 mark as nervousness over the credit crisis spread after the U.S. government's $700 billion bailout and interventions in Europe only seemed to add to investor anxiety. But hopes of a coordinated intervention to stop the bleeding in global markets helped the Dow recoup half of its losses, to close down 369 points, or 3.6%, to 9,955.

At the currency markets on Monday, the dollar rallied against the euro and the British pound but fell sharply against the yen, as the Dow Jones Industrial Average fell below 10,000 points for the first time since October 2004. The dollar index, which tracks the performance of the greenback against a trade-weighted basket of six major currencies, stood at 81.656, up from 80.606 late Friday. Earlier, it rose as high as 81.713.

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%.

Investors are concerned that a prolonged credit crisis would further undermine an already waning demand for energy as global growth slows down.

Against this background, reformulated gasoline fell 16.9 cents, or 7.6%, to close at $2.0591 a gallon and November heating oil dropped 18.8 cents, or 7.1%, to finish at $2.474 a gallon.

Natural gas was the biggest loser in the energy sector on Monday. November natural gas closed 7.1% lower, down 52.3 cents at $6.835 per million British thermal units on Nymex. Natural-gas futures haven't fallen below $7 since last December.

At the MCX, crude oil for October delivery closed at Rs 4,302/barrel, lower by Rs 118 (2.6%) against previous day’s close. Natural gas for October delivery closed at Rs 334/mmbtu, lower by Rs 14.4/mmbtu (4.1%).