Crude gains in last minutes

Prices slip by more than 32% in October

Crude prices ended with little gains on Friday, 31 October, 2008 after trading lower for almost the entire day. The firm dollar and the current global crisis were the main reasons behind the subdued crude prices. Friday’s weak economic data also added to this.

On Friday, crude-oil futures for light sweet crude for December delivery closed at $67.81/barrel (higher by $1.85 or 2.8%) on the New York Mercantile Exchange. Prices earlier touched a low of $63.12. Prices reached a high of $147 on 11 July but have dropped almost 54% since then. For the week, prices rose by 5.7%. On a yearly basis, crude price is lower by 31%. For this year in 2008, crude prices have dropped 29.4%. For the month of October, 2008, crude prices ended lower by 32.6%, the biggest monthly drop since 1983.

In the currency market on Friday, the U.S. dollar rose against the euro and the British pound. The dollar index gained 11% in October, 2008.

In an important economic release on Friday, data showed that September personal income and spending numbers were down 0.3%, reaffirming what was indicated in the advance third quarter GDP release.

There were also reports in the market during the week that OPEC was thinking about another production cut. Last week, OPEC had decided on a production cut. The decision, however, failed to perk up crude prices as traders still remained extremely worried that an ongoing recession will curtail demand for energy in the coming months.

The U.S. Energy Information Administration reported earlier this week that crude supplies climbed 500,000 barrels to 311.9 million for the week ended 24 October, 2008. They've climbed 21.7 million barrels in five weeks.

EIA also reported that motor gasoline supplies unexpectedly fell for the first time in five weeks, down 1.5 million barrels for the week ended Oct. 24 to total 195 million barrels. Supplies of the fuel had climbed 17.8 million barrels is the past four weeks. But they are still 2% below the year-ago level. And distillate stocks, which include heating oil, rose 2.3 million barrels to 126.6 million.

OPEC officials decided last Friday 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 will be cut by 1.5 million in November.

Last week, the Centre for Global Energy Studies said that global oil demand may fall for the first time in 15 years in 2008 and stagnate next year.

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 fell 1.8% to close at $1.4413 per gallon, while November heating oil added 1.1% to end at $2.0063 per gallon. The November contract expired at the end of the Nymex trading session on Friday. December reformulated gas closed at $1.4959 a gallon, up 3.4% and December heating oil climbed by 4.2% to close at $2.0842 a gallon.

Natural-gas futures were biggest winners in the energy sector on Friday. December natural gas rose 4.2% to close at $6.783 per million British thermal units, finishing 5% higher for the week. But front-month natural-gas futures saw a loss of around 8.8% for the month. They're down 9.4% year to date.

At the MCX, crude oil for November delivery closed at Rs 3,332/barrel, higher by Rs 125 (3.9%) against previous day’s close. Natural gas for November delivery closed at Rs 331.2/mmbtu, higher by Rs 9.6/mmbtu (2.9%).