Crude plunges again

February contract futures drop on first day of trading due to demand concerns

Crude prices continued to drop substantially even on Monday, 22 December, 2008. Prices fell due to a strong dollar, ongoing global economic crisis and lower energy demand.

On Monday, crude-oil futures for light sweet crude for February delivery closed at $39.91/barrel (lower by $2.45 or 5.8%) on the New York Mercantile Exchange. Earlier in the day, prices were trading higher by 2.5%. Prices reached a high of $147 on 11 July but have dropped almost 72.7% since then. Last, prices ended lower by almost $12.41 or 27%. For this year in 2008, crude prices have dropped 60%.

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.

As per reports, crude imports to China, the world second-largest consumer of oil, fell to their lowest level this year. The country imported 13.36 million tons of crude in November, or 3.25 million barrels a day, down 1.9% from a year ago.

OPEC President Chakib Khelil said over the weekend that that the cartel is willing to further reduce output as much as necessary to stabilize oil prices.

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.

Against this background, January reformulated gasoline tumbled 8.6% to 88.62 cents a gallon, and January heating oil slid 3.6% to $1.3415 a gallon.

January natural-gas futures fell 3.9% to $5.334 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 2,025/barrel, lower by Rs 24 (1.2%) against previous day's close. Natural gas for January delivery closed at Rs 254/mmbtu, lower by Rs 7.5/mmbtu (2.8%).