Crude pares earlier losses

Prices rise by more than 6% as February contract expires

Crude oil prices pared their earlier losses and ended higher on Tuesday, 20 January, 2009. Prices rose due to the impending stimulus package that is expected to be announced by new President Barack Obama soon. Prices were also volatile as traders moved their positions to cover the March positions as the February expired today.

On Tuesday, crude-oil futures for light sweet crude for February delivery closed at $38.74/barrel (higher by $2.23 or 6.1%) on the New York Mercantile Exchange. Earlier it dropped to a low of $32.5. March crude, the new front-month contract, fell $1.73 to end at $40.84 a barrel on Nymex. Last 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 18%.

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.

The Energy Information Administration also said last 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, ebruary reformulated gasoline fell 3 cents to $1.14 a gallon and February heating oil dropped 9 cents to $1.38 a gallon.

February natural gas futures fell 16 cents to end at $4.64 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 2,032/barrel, higher by Rs 34 (1.7%) against previous day's close. Natural gas for January delivery closed at Rs 231.5/mmbtu, lower by Rs 1.1/mmbtu (0.5%).