Crude drops

Prices cross $50 during mid day trading but ends lower

After rallying for four previous sessions, crude oil prices ended lower today on Tuesday, 06 January, 2009. Though prices had climbed up earlier in the session and had crossed the $50 mark after a long time, prices dropped at the end. Prices ended lower today due to dour economic data.

On Tuesday, crude-oil futures for light sweet crude for February delivery closed at $48.58/barrel (lower by $0.23 or 0.5%) on the New York Mercantile Exchange. During intra day trading, prices touched a high of $50.47. Prices reached a high of $147 on 11 July but have dropped almost 63% since then. Year to date, in 2009, crude prices have shot up by 8.7%.

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

The Commerce Department reported today that shipments from U.S. factories plunged a record 5.3% in November, 2008. Lower demand and falling prices were the reasons for this.

In line with the above report, in another separate report, The Institute for Supply Management reported today that nonmanufacturing sectors in the U.S. economy contracted in December.

As per the report, the ISM nonmanufacturing index rose to 40.6% in December from a record low of 37.3% in November. Readings below 50% indicate that more firms are contracting than expanding. In December, only one industry reported growth - retail trade.

Against this background, February reformulated gasoline rose 0.6% to $1.1892 a barrel and February heating oil gained 3.2% to $1.6263 a gallon. Year to date, gasoline is up 11.7% and heating oil is up 12.3%.

Natural gas for February delivery was down 1.5% at $5.983 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 2,387/barrel, higher by Rs 71 (3.1%) against previous day's close. Natural gas for January delivery closed at Rs 290.3/mmbtu, higher by Rs 1.6/mmbtu (0.55%).