Crude plunges again

Prices slip by another 5% after yesterday's 9% drop

Crude prices ended lower once again on Tuesday, 02 December, 2008. Prices fell as OPEC kept its production quota unchanged in last weekend's meeting and as traders mulled over demand for energy in the coming months.

On Tuesday, crude-oil futures for light sweet crude for January delivery closed at $46.96/barrel (lower by $2.32 or 4.7%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 67% since then. Last week, prices rose by 9%, the first weekly gain in a month. For this year in 2008, crude prices have dropped 50%.

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.

The Organization of Petroleum Exporting Countries ended a weekend meeting in Cairo without any decision on a production cut. OPEC President and Algerian Oil Minister Chakib Khelil said he expects oil demand to decline from a month ago, and said the group would take necessary action on 17 December when it meets in Oran, Algeria.

EIA will report the weekly status of crude and crude production inventories for last week tomorrow, Wednesday, at 10 am. Market expects a build up of crude and gasoline inventory of 2 million barrels and 1 million barrels respectively.

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 dropped 4.8% to $1.0583 a gallon and January heating oil slid 2% to $1.5832 a gallon.

January natural-gas futures fell 2.7% to $6.424 per million British thermal units.

At the MCX, crude oil for December delivery closed at Rs 2,479/barrel, lower by Rs 94 (3.6%) against previous day's close. Natural gas for November delivery closed at Rs 325.5/mmbtu, lower by Rs 10.6/mmbtu (3.1%).