Crude pares some losses

Weak dollar helps crude glide up

Crude prices, which fell earlier in the day on Wednesday, 18 March, 2009, pared some of its earlier losses and closed higher for the day. Prices dropped initially as energy department reported more than expected buildup in crude and gasoline inventories for last week. But then, with a weak dollar, crude prices reversed their course of direction and ended little lower.

On Wednesday, crude-oil futures for light sweet crude for April delivery closed at $48.14/barrel (lower by $1.02 or 2%) on the New York Mercantile Exchange. The more active May contract fell $1.14 to settle at $48.9/barrel. Last week, crude ended higher by 1.6%. For the month of February, crude prices had ended higher by 1.5%. The April futures contract will end this coming Friday.

Prices had remained extremely volatile last week also. 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 12.5%. On a yearly basis, crude prices are lower by 56%.

The EIA reported today that gasoline inventories rose by 3.2 million barrels in the week ended 13 March, 2009. The EIA also reported an increase of 2 million barrels in crude inventories. Market was expecting a decline in either case. The EIA also said distillate stockpiles, which include diesel and heating oil, rose by 100,000 barrels.

At the end of a two-day FOMC meeting in mid-afternoon, the Fed said it was committed to buying $300 billion in longer-term Treasurys to help the struggling American economy recover. In the currency market on Wednesday, the dollar slumped after Fed's announcement. The dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by almost 3% soon after Fed announced its plan to buy the long term treasuries.

Last Friday, the IEA said in the monthly report that global oil supply in February is estimated at 83.9 million barrels a day, down 1 million barrels from a month ago and 3.4 million barrels from a year ago. The agency also lowered its forecast for this year's global oil demand to 84.4 million barrels a day, 1.5%, or 1.2 million barrels, lower than a year ago.

Also at the Nymex on Wednesday, April reformulated gasoline fell 5 cents to end at $1.37 a gallon and April heating oil finished down 1 cent at $1.26 a gallon.

April natural-gas futures fell 13 cents to end at $3.68 per million British thermal units.

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 2,523/barrel, lower by Rs 45 (1.7%) against previous day's close. Natural gas for February delivery closed at Rs 191.2/mmbtu, lower by Rs 5.8/mmbtu (2.9%).