Crude pares earlier losses

But prices drop by more than 10% this week

Crude oil prices pared their earlier losses and ended higher on Friday, 16 January, 2009. Prices rose due to the weak dollar and also as traders moved their positions to cover the March positions as the February expires this coming Tuesday.

On Friday, crude-oil futures for light sweet crude for February delivery closed at $36.51/barrel (higher by $1.11 or 3.1%) on the New York Mercantile Exchange. Earlier it dropped to a low of $34.18. For the week, crude prices shed 10.6%.

Prices reached a high of $147 on 11 July but have dropped almost 68% since then. Year to date, in 2009, crude prices are lower by 24%.

At the currency market on Friday, the dollar was down against most major counterparts. The U.S. dollar fell due to weak batch of economic reports. The dollar fell on Friday after the Labor Department reported that U.S. consumer prices rose just 0.1% in 2008, the smallest increase in 54 years. The consumer price index fell 0.7% in December, the third decline in a row, led by an 8.3% drop in energy prices and a 0.1% drop in food prices.

Earlier last week, in its monthly report, OPEC announced that oil consumption will drop for the second consecutive year in 2009. As per the report, oil consumption is expected to fall 200,000 barrels a day this year. Consumption declined 100,000 last year, the first year of negative growth since 1983, the cartel, which controls about a third of the world's oil production.

Last week, the Energy Information Administration had 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.

The Energy Information Administration also said this week 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.

Against this background, February reformulated gasoline fell 0.6% to $1.1672 a gallon, and February heating oil slid 1% to $1.4734 a gallon.

Natural gas for February delivery fell 0.9% to $4.83 per million British thermal units.