Crude drops for fifth straight day

Prices drop by more than 7% on demand concerns

After rallying for four previous sessions, crude oil prices ended lower for the fifth consecutive day today on Monday, 12 January, 2009. Prices fell due to the overall weak economic sentiments surrounding the US economy in recent months.

On Monday, crude-oil futures for light sweet crude for February delivery closed at $37.59/barrel (lower by $3.24 or 7.9%) on the New York Mercantile Exchange. Earlier during the day, prices fell to a low of $37.48. 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%.

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.

Last week, the Labor Department reported the U.S. economy lost 524,000 jobs in December, closing out the worst year of job losses since World War II. The unemployment rate rose to 7.2%, the highest in 16 years. Nearly 2.6 million jobs were lost in 2008, with 1.9 million destroyed in just the past four months.

At the currency market on Monday, the dollar was up against most major counterparts. The U.S. dollar rose against the euro on expectations that the European Central Bank will cut its key interest rate later this week. The ECB's key lending rate stands at 2.5%.

Against this background, February reformulated gasoline sank 2.4% to $1.0841 a gallon, while February heating oil lost 2.1% to $1.4877 a gallon.

Natural gas for February delivery added 1.5% to $5.60 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 1,859/barrel, lower by Rs 100 (5.1%) against previous day's close. Natural gas for January delivery closed at Rs 274.4/mmbtu, higher by Rs 6/mmbtu (2.2%).