Crude drops again

Weekly inventory report takes prices lower

Crude oil prices once again dropped on Wednesday, 14 January, 2009. Prices fell due to the weekly inventory report that was reported by the Energy Department today.

On Wednesday, crude-oil futures for light sweet crude for February delivery closed at $37.28/barrel (lower by $0.50 or 1.3%) on the New York Mercantile Exchange. Earlier during the day, prices fell to a low of $35.52. Last week, crude prices shed 12%.

Prices reached a high of $147 on 11 July but have dropped almost 65% since then. Year to date, in 2009, crude prices are lower by 16.2%.

The Energy Information Administration today reported that at 326.6 million barrels, U.S. crude inventories reached their highest level since August 2007. Total products supplied in the U.S., including gasoline and heating oil, averaged 19.7 million barrels a day over the past four weeks, down 4% compared with the same period last year. U.S. refineries operated at 85.2% of their operable capacity last week, up from the previous week's 84.6%.

The report also detailed that gasoline inventories rose 2.1 million barrels and crude-oil stockpiles gained 1.2 million barrels last week. Distillate fuel inventories, including heating oil and diesel, jumped 6.4 million barrels in the week ended 9 January, 2009.

In the monthly report, the Energy Information Administration said yesterday that global oil consumption is projected to fall by 800,000 barrels per day in 2009. That's 400,000 barrels more than the previous month's forecast. Half of the consumption reduction in 2009 will come from the U.S., the world's largest oil consumer,

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

OPEC has been trying to cut production consistently in order to step up prices from their current low levels.

Saudi Oil Minister Ali al-Naimi said yesterday that February production will be “lower than the target” set at a 17 December, 2008 OPEC meeting. The country is currently producing 8 million barrels a day, about level with its 8.051 million-barrel-a-day allocation.

Oil ministers from the Organization of Petroleum Exporting Countries agreed in Oran, Algeria, to cut supply by 9% w.e.f 1January, 2009 to 24.845 million barrels a day.

Against this background, February reformulated gasoline fell 1.6% to $1.1677 a gallon and February heating oil dropped 3.4% to $1.4631 a gallon.

February natural-gas futures fell 4.1% to $4.97 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 1,787/barrel, lower by Rs 63 (3.4%) against previous day's close. Natural gas for January delivery closed at Rs 246.7/mmbtu, lower by Rs 12.4/mmbtu (4.8%).