Crude recovers from intra day lows

Crude prices drop by a dollar while natural gas price plunges 9%

Crude oil prices ended lower on Thursday, 21May, 2009 after weak set of economic reports once again raised demand questions for crude in the coming months. Prices fell despite energy department's weekly inventory report that came out yesterday showed more than expected drop in crude inventories for last week. But prices recovered from intra day lows.

On Thursday, crude-oil futures for light sweet crude for June delivery closed at $61.05/barrel (lower by $0.99 or 1.6%) on the New York Mercantile Exchange. Earlier during the day, it fell to a low of $59.92. Last week, crude ended lower by 3.9%.

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 58% since then. Year to date, in 2009, crude prices are higher by 27.6%. On a yearly basis, crude prices are lower by 48%.

In the currency market on Thursday, the U.S. dollar index, fell 0.8%. With today's drop, the dollar index fell to lowest level of the year.

There came another round of worse-than-expected jobless claims data today. Initial claims for the week ending 16 May totaled 631,000, while continuing claims climbed to 6.66 million. This, once again put pressure on the labor market scenario.

A separate report showed that there was first time increase in leading economic indicators in ten months but the same had little effect on trading. According to the data, leading indicators for April increased 1%, which topped the 0.8% increase that was expected.

EIA reported yesterday that crude inventories decreased by 2.1 million barrels in the week ended 15 May, 2009. Market was expecting a decline of 1.5 million barrels. Despite the decline, crude inventories, at 368.5 million barrels, were still above the upper boundary of the average range for this time of year. Refineries, meanwhile, operated at 81.8% of their operable capacity last week, slightly higher than a week ago.

Lower refinery production pushed gasoline inventories down by 4.3 million barrels to 204 million barrels, falling below the lower limit of the average range. The EIA also reported distillate stockpiles rose by 600,000 barrels. Motor gasoline demand had averaged about 9.1 million barrels per day over the past four weeks, down by 1.2% from the same period last year. Demand for distillate fuels, which include heating oil and diesel, fell 12%, and jet fuel consumption dropped 9%.

Last week, the International Energy Agency reported that it now expects demand to fall 2.6 million barrels a day from 2008 levels. This is 200,000 barrels more than the IEA had projected a month ago. This perhaps kept further rise in crude prices from check.

Also at the Nymex on Thursday, June-reformulated gasoline fell slightly to $1.7997 a gallon, and June heating oil lost 1.17 cent, or 0.8%, to $1.5294 a gallon.

Natural gas for June delivery fell 36.7 cents, or 9.2%, to $3.603 per million British thermal units. EIA reported today that inventories increased by 103 billion cubic feet in the week ended 15 May, 2009. At 2,116 billion cubic feet, stocks were 514 billion cubic feet higher than last year at this time and 387 billion cubic feet above the five-year average.

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

At the MCX, crude oil for June delivery closed at Rs 2,897/barrel, lower by Rs 35 (1.2%) against previous day's close. Natural gas for June delivery closed at Rs 179.7/mmbtu, lower by Rs 13.8/mmbtu (7%).