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Tuesday, November 18, 2008
Crude drops again
Prices close more than $2 lower as Japan slips into recession
The fact that Japan has slipped into recession for first time in seven years took crude prices lower on Monday, 17 November, 2008. Crude prices fell even after climbing high during intra day trading. The strong dollar also pressured crude price today.
On Monday, crude-oil futures for light sweet crude for December delivery closed at $54.95/barrel (lower by $2.09 or 3.7%) on the New York Mercantile Exchange. It touched a high of $59.85 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 63% since then. Last week, prices fell by 6.6%. On a yearly basis, crude price is lower by 45.7%. For this year in 2008, crude prices have dropped 49.2%.
For the month of October, 2008, crude prices ended lower by 32.6%, the biggest monthly drop since 1983.
In its latest monthly report, OPEC, today reduced its forecast for average oil consumption next year by 530,000 barrels a day, or 0.6% to 86.68 million barrels a day. It revised lower its 2008 view by 260,000 barrels a day to show minor growth of 280,000 barrels a day. In 2009, it expects world oil demand to rise by more than 500,000 barrels a day, which is a downward revision of around 200,000 barrels.
OPEC officials decided last month at its meeting at Vienna that OPEC will pare production by 1.5 million barrels a day w.e.f 1 November, 2008. The official production quota is currently 28.8 million barrels, and it decided to cut by 1.5 million in November. After that, Organization of the Petroleum Exporting Countries has pledged to cut production even deeper if prices are not in the $70-$90 range in its 1st December meeting.
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, December reformulated gasoline closed down 6.5 cents at $1.1746 a gallon. December heating oil finished at $1.791 a gallon, down 4.1 cents.
December natural gas futures rose 22.1 cents, or 3.5%, to end at $6.533 per million British thermal units.
At the MCX, crude oil for November delivery closed at Rs 2,878/barrel, higher by Rs 7 (0.24%) against previous day's close. Natural gas for November delivery closed at Rs 319.7/mmbtu, higher by Rs 10.8/mmbtu (3.5%).