Crude goes down

Prices end substantially lower on recession concerns

Oil prices ended substantially lower on Tuesday, 17 February, 2009. Prices slumped due to the ongoing recession concerns gripping the overall US economy and also many parts of the world.

On Tuesday, crude-oil futures for light sweet crude for March delivery closed at $34.93/barrel (lower by $2.53 or 7%) on the New York Mercantile Exchange. During the day, it fell to a low of $34.45. Last week, crude ended lower by 6.6%.

Prices reached a high of $147 on 11 July, 2008 but have dropped almost 77% since then. Year to date, in 2009, crude prices are lower by 23%. On a yearly basis, crude prices are lower by 65%.

Us stocks slumped today Wall Street even though President Barack Obama signed the stimulus deal to restore confidence among investors. Also, the New York Federal Reserve Bank said that manufacturing activity in the New York area contracted at a record pace in February. The bank's Empire State Manufacturing index fell to negative 34.7 in February from negative 22.2 in January.

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 fell 10 cents to end at $1.11 a gallon and March heating oil dropped 11 cents to finish at $1.19 a gallon.

March natural gas futures fell 25 cents to end at $4.20 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 1,959/barrel, lower by Rs 65 (3.2%) against previous day's close. Natural gas for February delivery closed at Rs 211/mmbtu, higher by Rs 1.4/mmbtu (0.7%).