Crude drops again

Prices fall as traders anticipate extremely weak job report

Crude prices fell on Thursday, 05 March, 2009 as traders panicked about tomorrow's impending job report which is expected to show drastic layoffs in USA's job market in almost last sixty years. Prices fell as traders thought that this is going to curb energy demand in coming months.

On Thursday, crude-oil futures for light sweet crude for April delivery closed at $43.61/barrel (lower by $1.77 or 3.9%) on the New York Mercantile Exchange. Last week, crude ended higher by 12%. For the month of February, crude prices had ended higher by 1.5%.

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 2.7%. On a yearly basis, crude prices are lower by 69%.

US stocks were back in the red since the very start on Thursday, 05 March, 2009. Financial sector put immense pressure on stocks as Citigroup shares dropped below $1 for the first time ever. Economic reports that checked in were mixed in nature.

The EIA had reported yesterday that U.S. crude inventories, excluding those in the Strategic Petroleum Reserve, fell by 700,000 barrels in the week ended 27 February, 2009. Market was expecting an increase of 2.2 million barrels. U.S. refiners operated at 83.1% of their operable capacity last week, up from the 81.4% a week ago. The EIA also reported gasoline inventories rose by 200,000 barrels, and distillate stockpiles, which include diesel and heating oil, rose 1.7 million barrels.

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. There has been conflicting reports in the market regarding the fact 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.

April reformulated gasoline fell 5% to $1.3127 a gallon, and April heating oil dropped 4.5% to $1.1598 a gallon.

April natural gas for April delivery fell 5.8% to end at $4.088 per million British thermal units. EIA reported today that U.S. natural gas inventories fell by 102 billion cubic feet in the week ended 27 February, 2009. At 1,793 billion cubic feet, stocks were 270 billion cubic feet higher than last year at this time and 218 billion cubic feet above the five-year average.

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 2,290/barrel, higher by Rs 13 (0.6%) against previous day's close. Natural gas for February delivery closed at Rs 215/mmbtu, lower by Rs 3.5/mmbtu (1.6%).