Crude continues with its upward journey

Mid East tension takes crude higher by more than 9% in two sessions

Ongoing conflicts at Middle East, OPEC's production cut and a hopeful stimulus plan from President Elect Barack Obama took crude prices higher on Monday, 05 January, 2009.

On Monday, crude-oil futures for light sweet crude for February delivery closed at $48.81/barrel (higher by $2.47 or 5.3%) on the New York Mercantile Exchange. During intra day trading, prices touched a high of $49.28. Prices reached a high of $147 on 11 July but have dropped almost 65% since then. Year to date, in 2009, crude prices have shot up by 9.2%.

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

As per latest reports, thousands of Israeli troops backed by tanks and helicopter gunships entered the Gaza Strip over the weekend and fought Hamas militants at close range.

Russia's conflict with Ukraine over supply of natural gas also pushed up crude prices higher today.

Hopes that OPEC will improve its compliance with production cuts also helped oil prices higher.

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 was 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, February reformulated gasoline also gained, up 6.5% to $1.1824 a gallon, and February heating oil jumped 6.5% to $1.5763 a gallon. Year to date, gasoline is up 11.1% and heating oil is up 9.1%.

February natural-gas futures rose 1.7% to $6.072 per million British thermal units in Nymex trading.

At the MCX, crude oil for January delivery closed at Rs 2,316/barrel, higher by Rs 61 (2.7%) against previous day's close. Natural gas for January delivery closed at Rs 288.7/mmbtu, lower by Rs 1.8/mmbtu (0.61%).