Crude shoots up again

Prices rise almost 9% as crude supplies drop

Weekly inventory report by the Energy Department and China's stimulus plan pushed crude prices higher for the second straight day on Wednesday, 04 March, 2009. Oil prices once again rose today in synchronization with stocks at Wall Street today.

On Wednesday, crude-oil futures for light sweet crude for April delivery closed at $45.38/barrel (higher by $1.5 or 8.9%) 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 6.6%. On a yearly basis, crude prices are lower by 67%.

The EIA reported today 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.

Total products supplied over the past four-week period have averaged 19.5 million barrels per day, down by 1.3% compared with the similar period last year. Among them, motor gasoline demand has averaged 9 million barrels per day, up by 2.2% from the same period last year.

The possibility of additional Chinese stimulus also boosted oil prices today. As per reports in the market today, Chinese Premier Wen Jiabao is considering new stimulus measures, adding to a $585 billion spending plan to revive the country's economy.

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 rose 4.7% to $1.3816 a gallon, and April heating oil gained 2.5% to $1.1796 a gallon.

April natural-gas futures rose 0.7% to $4.31 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 2,277/barrel, higher by Rs 170 (8.1%) against previous day's close. Natural gas for February delivery closed at Rs 218.5/mmbtu, lower by Rs 1.3/mmbtu (0.6%).