Crude rises

Crude registers biggest yearly drop in CY 2008

Ongoing conflicts at Middle East, OPEC's production cut and threat from Russia to cut off energy supplies to European countries took crude prices higher on the first trading session in FY 2009 on Friday, 02 January, 2009. Crude prices ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

On Friday, crude-oil futures for light sweet crude for February delivery closed at $46.34/barrel (higher by $1.74 or 3.9%) on the New York Mercantile Exchange. During intra day trading, prices touched a low of $41.05. Prices reached a high of $147 on 11 July but have dropped almost 68% since then.

Israeli warplanes conducted fresh attacks against Hamas in the Gaza Strip for a seventh straight day on Friday, raising concerns that oil supplies in the Middle East may be disrupted.

Hopes that OPEC will improve its compliance with production cuts also helped oil prices higher.

After a meeting in Oran, Algeria, the Organization of the Petroleum Exporting Countries agreed to cut 4.2 million barrels a day from its actual September production level of 29.045 million barrels a day on 17 December, 2008. The production cut was effective on 1 January, 2009. Excluding previously announced cuts, OPEC will actually cut its daily production by 2.2 million barrels from current levels. That constitutes its biggest production cut ever.

Against this background, February heating oil rose 2.6% to $1.4803 a gallon. February reformulated gasoline gained 4.6% to $1.1105 a gallon.

February natural gas futures rose 6.2% to $5.971 per million British thermal units.

At the MCX, crude oil for January delivery closed at Rs 2,255/barrel, higher by Rs 31 (1.4%) against previous day's close. Natural gas for January delivery closed at Rs 290.5/mmbtu, higher by Rs 0.5/mmbtu (0.17%).