Crude pares early losses

Rally at Wall Street also pushes crude higher

Oil prices gave up earlier losses and ended higher for the day on Thursday, 05 February, 2009 as US stocks rallied today and OPEC hinted at further production cuts. Prices initially had dropped as yesterday's weekly inventory report by the Energy department showed that crude inventories rose more than expected in the last week. Gasoline prices too jumped considerably higher today.

On Thursday, crude-oil futures for light sweet crude for March delivery closed at $41.17/barrel (higher by $0.85 or 2.1%) on the New York Mercantile Exchange. Earlier during the day, it touched a low of $39.46. 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 7.5%. On a yearly basis, crude prices are lower by 53%.

US stocks pared early losses and were ended in the green today. Couple of better than earning reports helped stocks gain momentum which had otherwise had a slow start due to a weaker than expected guidance from Cisco Systems after yesterday's close. Economic reports dominated the first half today and all were almost in line with expectations pointing out towards an economy in recession. Financial and technology sectors contributed to the turnaround.

The EIA had reported yesterday 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. The report had also said that demand for fuels during the past four weeks averaged 19.5 million barrels a day, up 0.6% from the average a week before

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, gasoline futures for March delivery climbed 5.64 cents (4.6%) to $1.2748 a gallon in New York. Heating oil increased 4.02 cents (3%) to end the session at $1.3672 a gallon.

Natural-gas futures also rose today after the Energy Information Administration reported U.S. inventories fell by 195 billion cubic feet in the week ended 30 January. March natural gas futures added 4 cents to end at $4.64 per million British thermal units. The EIA reported natural gas inventories fell by 195 billion cubic feet to 2,179 billion cubic feet.

At the MCX, crude oil for February delivery closed at Rs 1,995/barrel, lower by Rs 18 (0.9%) against previous day's close. Natural gas for February delivery closed at Rs 229.8/mmbtu, higher by Rs 2.2/mmbtu (0.96%).