Crude witnesses massive jump

Prices climb by more than 10% in a single session

Crude prices ended with substantial gains on Tuesday, 04 November, 2008. The weak dollar was the main reasons behind this. Crude even ignored a weak economic data today.

On Tuesday, crude-oil futures for light sweet crude for December delivery closed at $70.53/barrel (higher by $6.62 or 10.4%) on the New York Mercantile Exchange. Prices reached a high of $71.77 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 47% since then. Last week, prices rose by 5.7%. On a yearly basis, crude price is lower by 23%. For this year in 2008, crude prices have dropped 25.2%.

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

In the currency market on Tuesday, the dollar fell sharply against the euro and most other major currencies but gained on the yen as Americans headed to the polls and equity markets surged on a further bounce in risk appetite. The dollar index, a measure of the greenback against a trade-weighted basket of six currencies, was at 84.660, up by 1.9%.

Brent crude oil for December settlement increased $5.96 (9.9%) to settle at $66.44 a barrel on London's ICE Futures Europe exchange.

In economic news, market participants shrugged off negative factory orders data. September factory orders fell 2.5% month-over-month after dropping 4.3% in August. The results were worse than the 0.8% decline that was expected.

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 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, December reformulated gasoline rose 12.5% to close at $1.5327 a gallon and December heating oil gained 9% to close at $2.1616 a gallon.

December natural-gas futures rose 38.1 cents, or 5.6%, to finish at $7.219 per million British thermal units.

At the MCX, crude oil for November delivery closed at Rs 3,343/barrel, higher by Rs 176 (5.5%) against previous day’s close. Natural gas for November delivery closed at Rs 344.4/mmbtu, higher by Rs 18.4/mmbtu (5.6%).