Crude pares early gains

Crude inventories climb more than expected

Oil prices gave up earlier gains and fell lower and closed just a little above $40/barrel on Wednesday, 04 February, 2009. Prices dropped as the weekly inventory report by the Energy department showed that crude inventories rose more than expected in the last week.

On Wednesday, crude-oil futures for light sweet crude for March delivery closed at $40.32/barrel (lower by $0.46 or 1.1%) on the New York Mercantile Exchange. Earlier during the day, it touched a high of $41.92. But while dropping, it touched a low of $39.74. 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 70% since then. Year to date, in 2009, crude prices are lower by 9.6%. On a yearly basis, crude prices are lower by 55%.

The EIA reported today that crude inventories rose for a sixth straight week to 346.1 million barrels last week, the highest level since July 2007. Meanwhile, U.S. refineries operated at 83.5% of their operable capacity last week, up from the previous week's 82.5%.

The EIA also reported gasoline inventories rose by 300,000 barrels while distillate fuel, which includes diesel and heating oil, fell by 1.4 million barrels.

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 4.4% to $1.2184 a gallon and March heating oil rose 0.2% to $1.327 a gallon.

March natural-gas futures rose 1.9% to $4.597 per million British thermal units.

At the MCX, crude oil for February delivery closed at Rs 2,013/barrel, higher by Rs 38 (1.9%) against previous day's close. Natural gas for February delivery closed at Rs 227.6/mmbtu, higher by Rs 10.1/mmbtu (4.6%).