Crude shoots up

Prices rise by another 6% on stimulus plan

Crude oil prices shot up substantially on Wednesday, 21 January, 2009. Prices rose as traders anticipated that new President Barack Obama would soon implement a new stimulus package for $850 billion which would in turn increase energy demand in the coming months. Prices were also volatile as traders moved their positions to cover the March positions as it was the first day of trading for the March contract.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $43.55/barrel (higher by $2.71 or 6.6%) on the New York Mercantile Exchange. 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 12.5%. On a yearly basis, crude prices are lower by 52%.

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.

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, March reformulated gasoline rose 3 cents to $1.20 a gallon and March heating oil added 1 cent to $1.38 a gallon.

February natural-gas futures rose 14 cents to end at $4.78 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 2,093/barrel, higher by Rs 61 (3%) against previous day's close. Natural gas for January delivery closed at Rs 235.9/mmbtu, higher by Rs 4.4/mmbtu (1.9%).

Energy traders will have to wait another day for the latest government data on U.S. petroleum stockpiles. The Energy Information Administration will report its latest data at 11 a.m. Eastern time on Thursday, a day late because of Martin Luther King Jr. Day on Monday, 19 January, 2009.