Crude shoots up

Oil prices witness highest levels in 2009

Crude prices shot up substantially on Thursday, 19 March, 2009. The weak dollar was mainly the reason for this. The dollar once again slumped today after Fed said yesterday that it will buy long term treasuries and this also increased the appeal of precious metals as a safe haven against alternatives. Fed's recent moves sparked some good notions about the recovery from the recent recession in US.

On Thursday, crude-oil futures for light sweet crude for April delivery closed at $51.61/barrel (higher by $3.47 or 7.2%) on the New York Mercantile Exchange. The more active May contract rose 6.4% to settle at $52.04/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 tomorrow.

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 19.7%. On a yearly basis, crude prices are lower by 53%.

Yesterday, 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 Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by almost 1.5% following yesterday's 3% drop.

The EIA reported yesterday 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.

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 Thursday, April-reformulated gasoline rose 5.2% to $1.4373 a gallon and April heating oil gained 7.3% to $1.3563 a gallon.

April natural-gas futures rose 13.3% to $4.174 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 2,601/barrel, higher by Rs 78 (3.1%) against previous day's close. Natural gas for April delivery closed at Rs 213/mmbtu, higher by Rs 16.6/mmbtu (8.5%).