Crude recovers partially

Prices drop by more than 11% for the week

Crude prices rose for the first time last week on Friday, 26 December, 2008. Prices rose as traders thought that the previous sessions' 10% drop due to a strong dollar was just overdone.

On Friday, crude-oil futures for light sweet crude for February delivery closed at $37.71/barrel (higher by $2.36 or 6.7%) on the New York Mercantile Exchange. Prices reached a high of $147 on 11 July but have dropped almost 74% since then. For the week, prices ended lower by 11%. 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.

The EIA also reported earlier in the week that total U.S. crude-oil stockpiles, excluding those in the Strategic Petroleum Reserve, fell for the first week in three, down 3.1 million barrels to 318.2 million for the week ended 19 December, 2008. Market was looking a weekly increase of 1.5 million barrels.

EIA also reported that gasoline supplies rose by 3.3 million barrels in the latest week, while distillate stocks increased 1.8 million barrels. Total supplies of petroleum products, including gasoline and heating oil, have averaged about 19.8 million barrels a day over the last four-week period, down by 4.2% compared to the similar period last year. Also last week, refineries ran at 84.7% of their operable capacity, up slightly from the prior week.

OPEC President Chakib Khelil said over last 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 rose 6.4% to 84.40 cents a gallon. January heating oil gained 3.9% to $1.245 a gallon.

Natural gas for January delivery fell 1.4% to $5.826 per million British thermal units.