Crude pares early gains

Prices drop despite unexpected drop in crude inventories

Crude oil ended lower on Wednesday, 13 May, 2009. Prices gave up earlier gains and closed lower despite a surprising drop in crude inventories for last week that was reported by EIA.

On Wednesday, crude-oil futures for light sweet crude for June delivery closed at $58.02/barrel (lower by $0.83 or 1.4%) on the New York Mercantile Exchange. Earlier, it rose by more than 1% but then pared all its losses. Last week, crude ended higher by 10.2%.

Crude ended April higher by 2.9%. Previously, March trading ended 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 61% since then. Year to date, in 2009, crude prices are higher by 22.8%. On a yearly basis, crude prices are lower by 38%.

The EIA reported today that U.S. crude inventories excluding those in the Strategic Petroleum Reserve decreased by 4.7 million barrels in the week ended 8 May, 2009. Market was expecting a gain of more than 1 million barrels. The drop in the inventories level was helped by weak imports. Oil imports averaged 8.7 million barrels per day last week, down 1.2 million barrels per day from the previous week.

EIA also reported that demand still remained weak. Total petroleum demand over the past four weeks averaged 18.2 million barrels a day, down by 7.9% from a year ago. In individual petroleum products, gasoline demand fell 1.2% from a year ago, distillate fuel, which include diesel and heating oil, dropped 14.1%, while jet fuel consumption declined 10.3%.

Also at the Nymex on Wednesday, June-reformulated gasoline rose 2.09 cents, or 1.3%, to $1.6888 a gallon, and June heating oil fell 1.7 cents, or 1.1% to $1.49 a gallon.

Natural gas for June delivery lost 11.9 cents, or 2.6%, to $4.333 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 May delivery closed at Rs 2,909/barrel, higher by Rs 2 (0.06%) against previous day's close. Natural gas for May delivery closed at Rs 220.6/mmbtu, higher by Rs 4.3/mmbtu (1.98%).