Crude drops below $34

January contract futures drop drastically on the last day of trading

Crude prices continued to drop substantially even on Friday, 19 December, 2008. Prices fell due to a strong dollar, ongoing global economic crisis and gathering crude stockpiles due to lower energy demand.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $33.87/barrel (lower by $2.35 or 6.5%) on the New York Mercantile Exchange. Earlier in the day, prices touched a low of $32.4. Prices reached a high of $147 on 11 July but have dropped almost 76% since then. For the week, prices ended lower by almost $12.41 or 27%. For this year in 2008, crude prices have dropped 65%.

Friday marked the last trading day for the January contract. Oil for February delivery, now the most active contract, rose 69 cents to end at $42.36 a barrel on the New York Mercantile Exchange on Friday. The contract lost 14% during the week

For the month of November, crude prices ended lower by 19.7%. Before this, for the month of October, 2008, crude prices had ended lower by 32.6%, the biggest monthly drop since 1983.

After a meeting in Oran, Algeria, the Organization of the Petroleum Exporting Countries agreed to cut 4.2 million barrels a day from its actual September production level of 29.045 million barrels a day on 17 December, 2008. The production cut is effective on 1 January, 2009. Excluding previously announced cuts, OPEC will actually cut its daily production by 2.2 million barrels from current levels. That constitutes its biggest production cut ever.

At the currency market on Friday, the dollar was up against most major counterparts Thursday, jumping against the euro after the European Central Bank cut its deposit rate and lifted lending rates in the wake of the U.S. Federal Reserve's easing earlier this week.

The Energy Information Administration reported earlier during the middle of the week that that U.S. crude supplies rose by 500,000 barrels to stand at 321.3 million barrels during the week ended 12 December, 2008. At 321.3 million barrels, total U.S. crude inventories were 17.5 million barrels above the five-year average and 24.4 million barrels above year-ago levels. The EIA also reported an increase of 1.3 million barrels in gasoline stocks and a rise of 2.9 million barrels in distillate stocks last week.

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, January reformulated gasoline gained 1 cent to end at 97 cents a gallon and January heating oil rose 2 cents to $1.39 a gallon.

January natural-gas futures fell 22 cents to end at $5.33 per million British thermal units.