Crude ends more than $2 higher

Prices pare early losses thinking recent drop in prices is not justified

After two consecutive sessions of drop, crude prices ended higher on Thursday, 13 November, 2008. A sudden and late rise in US stocks today at Wall Street was the main reason behind this. Crude had earlier dropped during the day.

On Wednesday, crude-oil futures for light sweet crude for December delivery closed at $58.24/barrel (higher by $2.08 or 3.7%) on the New York Mercantile Exchange. Prices reached a low of $54.67 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 68% since then. Last week, prices fell by 10%. On a yearly basis, crude price is lower by 40%. For this year in 2008, crude prices have dropped 43.5%.

For the month of October, 2008, crude prices ended lower by 32.6%, the biggest monthly drop since 1983.

EIA reported today that crude supplies were unchanged for a second week to stand at 311.9 million barrels for the week ended 7 November, 2008. Motor gasoline supplies climbed 2 million to 198.1 million barrels in the latest week. And distillates, which include heating oil, were up 600,000 barrels at 128.4 million

The IEA, in its latest report, said today that it expects global demand to grow by 120,000 barrels to 86.2 million barrels a day in 2008, down 330,000 barrels from its previous daily forecast. And for 2009, it now sees demand rising 350,000 barrels to 86.5 million barrels a day, which is down 670,000 barrels a day from its previous estimate.

In its latest monthly report issued yesterday, EIA said that it expects world oil demand to rise almost 100,000 barrels per day in 2008 and to remain "virtually flat" in 2009. In US, it expects petroleum-product demand to drop 5.4%, or 1.1 million barrels per day, from the 2007 average to 19.6 million barrels per day in 2008. That marks the first time since 1980 that annual total petroleum consumption is expected to decline by more than 1 million barrels per day. The government also predicts an average crude price of $101.45 for this year and $63.50 for 2009.

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 at $1.3024 a gallon, up 5.4 cents, or 4.4%, and December heating oil added 4 cents to finish at $1.875 a gallon.

December natural-gas futures shed 8.7 cents to close at $6.318 per million British thermal units. Prices are down about 15% year-to-date.