Crude continues to drop

Prices drop as traders anticipate more than anticipated buildup in inventories

Crude oil fell once again on Tuesday, 14 April, 2009 as traders anticipated that crude inventories rose more thane expected this week. Discouraging retail sales data also reminded traders once again regarding recession. Yesterday, the International Energy Agency had lowered its forecast for this year's global oil demand.

On Tuesday, crude-oil futures for light sweet crude for May delivery closed at $49.41/barrel (lower by $0.64 or 0.6%) on the New York Mercantile Exchange. During intra day trading, it rose to a high of $51.12. Last week, crude ended lower by 0.5%.

Crude ended March trading up 10.9%. It rallied 11.3% in the first quarter. 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 70% since then. Year to date, in 2009, crude prices are higher by 12%. On a yearly basis, crude prices are lower by 52%.

The Commerce Department reported today that U.S. retail sales dropped a seasonally adjusted 1.1% in March after two months of gains had boosted hopes of a rebound in consumer spending. Sales fell in March for almost every type of store except the necessities of food and drugs.

In a separate report, the Labor Department said producer prices fell 1.2% in March, much more than the 0.5% decline expected. Core prices - which exclude food and energy were unchanged. Producer prices are down 3.5% in the past year, the largest decline in wholesale prices since 1950.

Paris based IEA reported yesterday that it is cutting its demand projection by 1 million barrels a day. After the latest revision, global oil demand this year is now forecast at 83.4 million barrels a day, which is 2.4 million barrels a day below the 2008 level.

Also at the Nymex on Tuesday, May reformulated gasoline fell 0.4% to $1.4576 a gallon and May heating oil gained 0.3% to $1.4023 a gallon.

May natural-gas futures added 1.7% to $3.689 per million British thermal units.

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