Crude goes lower

Economic data weighs on the price

Oil prices dropped to the lowest levels in two weeks on Monday, 02 January, 2009 as weak demand concerns once again unnerved traders.

On Monday, crude-oil futures for light sweet crude for March delivery closed at $40.08/barrel (lower by $1.6 or 3.8%) on the New York Mercantile Exchange. Earlier during the day, it touched a low of $39.83. Last week, crude prices ended lower by 10%. In January, 2009, crude shed 14%.

Prices reached a high of $147 on 11 July but have dropped almost 72% since then. Year to date, in 2009, crude prices are lower by 17.8%. On a yearly basis, crude prices are lower by 68%.

Among major economic reports for the day, personal spending data showed that consumer spending remained under severe constraint pressed by rising unemployment, tight credit and declining home prices, and swooning asset portfolios. Personal spending in December was down 1%. The data were generally in-line with expectations.

The Commerce Department reported last week that the U.S. economy contracted at a 3.8% annualized rate in the fourth quarter, a decline that would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth. Adjusted, gross domestic product contracted at a 5.1% pace in the final three months of 2008, the weakest in 28 years. But still it was less bad than feared.

Against this background, March reformulated gasoline fell 9.4%, to $1.1492 a gallon, and March heating oil dropped 6.4% to $1.3424 a gallon.

March natural gas futures rose 3.2% to $4.557 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 2,023/barrel, lower by Rs 35 (1.7%) against previous day's close. Natural gas for February delivery closed at Rs 226.2/mmbtu, higher by Rs 8.8/mmbtu (4.04%).