Crude falls

Prices end lower after US stocks plunge

Oil prices ended substantially lower on Monday, 23 February, 2009. Prices had been dropping in the past few sessions due to the ongoing recession concerns gripping the overall US economy and also many parts of the world. Prices also dropped today in synchronization with the fall in stocks at Wall Street.

On Monday, crude-oil futures for light sweet crude for April delivery closed at $38.44/barrel (lower by $1.59 or 3.9%) on the New York Mercantile Exchange. Last week, crude ended higher by 3.8%.

Prices reached a high of $147 on 11 July, 2008 but have dropped almost 74% since then. Year to date, in 2009, crude prices are lower by 11.9%. On a yearly basis, crude prices are lower by 65%.

In Wall Street on Monday, indices continued to linger in the red. Though market opened in the green, indices slipped in the red soon after. The industrial sector weighed on the market sentiment today. Concerns about the health of GE are worrying investors today, as is the issue of the nationalization of the banks here, mainly Citigroup.

Prices had been sliding since past couple of days after fear gripped the US economy that US banks might be nationalized. The gear eased a bit after President Barack Obama said that he is in favour of “privately owned” banks.

Recently, Paris based, IEA has reported that this year's global oil demand will fall by 1 million barrels a day, or 1.1%, from last year. If realized, it will be the biggest yearly drop since 1982. The IEA cited a worsening economic outlook across all regions as the reason for the weakness in oil demand.

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. OPEC agreed to reduce production by a record amount of 2.2 million barrels a day, starting from 1 January, 2009 adding to previous cuts of 2 million barrels. Overall, the reduction is equal to about 5% of the world's oil demand.

Against this background, March reformulated gasoline futures lost 2.9% to $1.0433 a gallon and March heating-oil futures fell 1.8% to $1.1754 a gallon.

Natural gas for March delivery added 2.1% to $4.093 per million British thermal units.