Crude slides down

Oil prices drop as crude inventories rise more than expected

Crude prices ended lower on Wednesday, 25 March, 2009 as the weekly inventory report by the energy department showed that crude inventories rose more than expected last week. It was due to the drop in demand for petroleum products. Crude prices fell today despite the weak dollar.

On Wednesday, crude-oil futures for light sweet crude for May delivery closed at $52.77/barrel (lower by $1.21 or 2.2%) on the New York Mercantile Exchange. Last week, crude ended higher by 10.4%. For the month of February, crude prices had ended higher by 1.5%.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 64.6% since then. Year to date, in 2009, crude prices are higher by 18.3%. On a yearly basis, crude prices are lower by 50%.

The EIA reported today that crude inventories rose 3.3 million barrels last week (for the week ended 20 March, 2009), more than the 1.4 million barrels expected. At 356.6 million barrels, stocks are at the highest level since July 1993. U.S. refineries operated at 82% of their operable capacity last week, down slightly from a week ago.

EIA also reported that total petroleum products supplied over the past four weeks averaged 19.1 million barrels a day, down 3.2% from a year ago. Gasoline inventories fell by 1.1 million barrels in the week while distillate stockpiles, which include diesel and heating oil, declined by 1.6 million barrels.

In the currency market today, the dollar weakened against its rivals. The dollar index, which measures the strength of the dollar against a basket of six currencies fell 0.6%. But then, the dollar pared almost all its losses after Treasury Secretary Timothy Geithner clarified his earlier comments, emphasizing that the dollar remains the world's reserve currency.

Also at the Nymex on Wednesday, April-reformulated gasoline fell 0.5% to $1.495 a gallon and April heating oil dropped 2.3% to $1.4647 a gallon.

April natural-gas futures fell 0.4% to $4.329 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 2,685/barrel, lower by Rs 6 (0.22%) against previous day's close. Natural gas for April delivery closed at Rs 223.5/mmbtu, lower by Rs 1/mmbtu (0.44%).