Crude drops

Demand concerns weigh on crude prices

Crude prices ended lower on Thursday, 29 January, 2009 as a set of weak economic data hinted towards lower energy demand in the coming months. Prices also went lower after yesterday's weekly inventory report showed build up in crude inventories for fifth straight week.

On Thursday, crude-oil futures for light sweet crude for March delivery closed at $43.6/barrel (lower by $0.72 or 1.7%) on the New York Mercantile Exchange. Last week, crude prices ended higher by 9%. Prices had reached a low of $40.18 earlier during the day today.

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 15.7%. On a yearly basis, crude prices are lower by 55%.

Among major economic reports for the day, there were quite a few of them. The durable goods order, initial jobless claims data and December new home sales data – all checked in below expectation.

Initial jobless claims for the week ended Jan. 24 increased modestly to 588,000, which is a bit above the consensus estimate of 575,000 claims. Continuing claims climbed to 4.78 million. That is the highest level of continuing claims dating back to four decades.

December durable goods orders declined 2.6%. That was the fifth straight monthly decline reflecting an ongoing pullback in business investment. The drop was more than expected. Excluding transportation, orders were down 3.6%.

The Energy department had reported yesterday that U.S. crude stockpiles jumped 6.2 million barrels last week to reach 338.9 million barrels. That's the highest level the EIA has reported since August 2007. U.S. refineries operated at 82.5% of their operable capacity last week, down from the 83.3% a week ago. EIA had also reported that gasoline inventories fell 100,000 barrels, and distillate fuel stockpiles, which include heating oil and diesel, dropped 1 million barrels last week.

Against this background, March reformulated gasoline rose 4% to $1.2309 a gallon, and March heating oil rose 0.5% to $1.4283 a gallon.

March natural gas rose 3.5% to $4.576 per million British thermal units. EIA reported today that U.S. natural-gas inventories fell 186 billion cubic feet in the week ended 23 January, 2009. Gas in storage was higher by 34 billion cubic feet than at this time last year and by 29 billion cubic feet compared to the five-year average.

At the MCX, crude oil for February delivery closed at Rs 2,034/barrel, lower by Rs 16 (0.8%) against previous day's close. Natural gas for February delivery closed at Rs 218.6/mmbtu, higher by Rs 2.4/mmbtu (1.1%).