Crude plunges

Prices drop by 25% in the past week

Crude prices ended substantially lower on Friday, 05 December, 2008. Prices fell as traders anticipated that demand for energy in coming months as US market faced one of the worst job reports in last thirty four years once again proving that US is deep into a recession. The strong dollar also pressured crude prices.

On Friday, crude-oil futures for light sweet crude for January delivery closed at $40.81/barrel (lower by $2.85 or 6.5%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 77% since then. For the week, prices coughed up 25%. This was the largest weekly loss for crude in past tenty five years. For this year in 2008, crude prices have dropped 56.5%.

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.

At the currency market on Friday, the dollar index, which tracks the value of the greenback against other major currencies, rose 1%. The dollar index briefly reduced its gains after the Labor Department reported U.S. nonfarm payrolls plunged by 533,000 in November, the worst job loss in 34 years. Market was expecting a loss of 350,000. Labor Department also reported an unemployment rate of 6.7% in November, the highest in US since 1991.

EIA reported last Wednesday that total U.S. petroleum products supplied in the past four weeks dropped 6.6% from the same period a year ago. Motor gasoline demand in the world's biggest oil consuming country dropped 2.8%.

The Organization of Petroleum Exporting Countries ended meeting in Cairo last month without any decision on a production cut to restore crude prices. 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.

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 fell 7% to 90.12 cents a gallon, and January heating oil fell 5.5% to $1.4265 a gallon.

January natural-gas futures tumbled 4.6% to $5.742 per million British thermal units.

At the MCX, crude oil for December delivery closed at Rs 2,079/barrel,higher by Rs 4 (0.19%) against previous day's close. Natural gas for November delivery closed at Rs 287.7/mmbtu, higher by Rs 0.1/mmbtu (0.03%).