Volatile crude ends higher

Prices gain on Chinese stimulus news

Crude prices ended higher on Monday, 10 November, 2008. Crude prices rose following the stimulus package announced by China over the weekend to boost its economy. The same increased the appeal of crude oil as traders mulled over the potential energy demand in the coming months. But crude remained immensely volatile today and traded within a band of $6.

On Monday, crude-oil futures for light sweet crude for December delivery closed at $62.41/barrel (higher by $1.27 or 2.2%) on the New York Mercantile Exchange. Prices reached a low of $59.1 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 61.3% since then. Last week, prices fell by 10%. On a yearly basis, crude price is lower by 35.5%. For this year in 2008, crude prices have dropped 36.5%.

Another big factor for oil's price gains on Monday was the Organization of the Petroleum Exporting Countries' pledge to cut production even deeper if prices are not in the $70-$90 range.

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

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 month, 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 by 1.4% to finish at $1.3679 a gallon and December heating oil closed up 1.4% at $2.0056 a gallon.

December natural gas climbed 7.3% to close at $7.248 per million British thermal units on Nymex on Monday.

At the MCX, crude oil for November delivery closed at Rs 2,898/barrel, lower by Rs 83 (2.8%) against previous day's close. Natural gas for November delivery closed at Rs 342/mmbtu, higher by Rs 14/mmbtu (4.3%).