Crude drops on inventory report

Crude supplies register unexpected rise for last week

Crude prices fell today, Wednesday, 11 March, 2009. Prices fell today after energy department in its weekly inventory report reported unexpected increase in crude inventories for last week. Crude prices fell today despite a weak dollar.

On Wednesday, crude-oil futures for light sweet crude for April delivery closed at $42.33/barrel (lower by $3.38 or 7.4%) on the New York Mercantile Exchange. Last week, crude ended higher by 1.7%. 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 67% since then. Year to date, in 2009, crude prices are higher by 0.2%. On a yearly basis, crude prices are lower by 60%.

The EIA reported today in its weekly inventory report that crude inventories rose by 700,000 million barrels last week. Market had expected a decline of 1 million barrels. As per the report, refinery capacity utilization rate remained low at 82.7%. It also showed that inventories at Cushing, Oklahoma, the delivery point for Nymex futures, fell for a fourth week to $33.6 million barrels.

The EIA report also showed petroleum demand has been falling. Total petroleum products supplies over the past four weeks, including gasoline, jet fuel and diesel, averaged 19.3 million barrels a day, down by 2.1% from a year ago. But gasoline demand over the past four weeks rose by 1.6% from a year ago.

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.

Also at the Nymex on Tuesday, April reformulated gasoline lost 3.5% to $1.2512, April heating oil dropped 1.4% to $1.1987 a gallon.

April natural-gas futures sank 0.9% to $3.806 per million British thermal units.

Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.