Crude regains $50 level

Huge weekly drop for crude prices

Crude prices ended marginally higher on Friday, 21 November, 2008. Crude prices gained after quite a long time on reports of another production cut decided by OPEC members. Prices also rose due to a weak dollar.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $49.93/barrel (higher by $0.51 or 1%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 66% since then. For the week, prices fell by 13%. For this year in 2008, crude prices have dropped 55%.

Brent crude oil for January settlement rose $1.11 cents (2.3%) to $49.19 a barrel on London's ICE Futures Europe exchange.

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

As per reports, The Organization of Petroleum Exporting Counties will trim supplies by 3.8% this month as members implement an October agreement. Thirteen OPEC members, due to meet in Cairo eight days from now, are set to supply 30.98 million barrels a day this month compared with 32.2 million a day in October.

Prior to this, 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 had pledged to cut production even deeper if prices are not in the $70-$90 range in its 1st December meeting.

In its latest monthly report last week, OPEC, 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.

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%.

At the currency market on Friday, the U.S. dollar declined versus major currencies including the euro and British pound as currency markets took the cue from gains in U.S. stocks. The dollar index, a measure of the greenback against a trade-weighted basket of six major currencies, fell to 87.658 from 88.233.

Against this background, reformulated gasoline gained 5 cents to end at $1.09 a gallon and January heating oil rose 2 cents to $1.71 a gallon.

December natural-gas futures rose 16 cents to end at $6.48 per million British thermal units.