Crude witnesses another big rise

Prices cross the $45 mark almost after a month

Oil prices shot up once again on Thursday, 26 February, 2009. Prices continued to rise after energy department reported yesterday in its weekly inventory report that gasoline inventories dropped during last week. Prices also rose after OPEC spoke about another production cut in coming months earlier during the week.

On Thursday, crude-oil futures for light sweet crude for April delivery closed at $45.22/barrel (higher by $2.72 or 6.4%) 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 69% since then. Year to date, in 2009, crude prices are higher by 5%. On a yearly basis, crude prices are lower by 60%.

EIA had reported yesterday that U.S. gasoline consumption during the past four weeks rose 1.7% from a year ago. Gasoline inventories fell by 3.4 million barrels.

EIA had also reported yesterday that crude inventories rose by 700,000 barrels to 351.3 million during last week. Market had expected a rise of more than 2 million barrels. Total products supplied over the past four weeks, including gasoline, diesel and jet fuel, averaged 19.7 million barrels per day, down 0.8% from a year ago. Excluding jet fuel, total products supplied rose slightly.

Prices had been sliding since past couple of months after fear gripped the US economy that US banks might be nationalized.

OPEC has been trying to cut production consistently in order to step up prices from their current low levels. As per reports during the last weekend, Algerian Energy Minister Chakib Khelil said that OPEC is likely to reduce output in March, 2009. OPEC has already agreed to cut cartel quotas by 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. The cartel is supposed to meet on 15 March at Vienna.

Against this background, March reformulated gasoline surged 11% to $1.3004 a gallon. Also in energy trading, March heating oil rose 4.6% to $1.2941 a gallon. Both contracts will expire at the end of trading on Friday.

Natural gas for April delivery added 1.2% to $4.077 per million British thermal units. EIA reported today that supply of U.S. natural gas in storage fell by 101 billion cubic feet in the week ended 20 February, 2009, less than expected. At a total of 1.895 trillion cubic feet, gas in storage stood higher by 233 billion cubic feet than at the same time last year and by 199 billion cubic feet above the five-year average.

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.

At the MCX, crude oil for March delivery closed at Rs 2,232/barrel, higher by Rs 121 (5.7%) against previous day's close. Natural gas for February delivery closed at Rs 206.9/mmbtu, higher by Rs 3.5/mmbtu (1.9%).