Crude glides down

Prices drop as energy department announces sudden rise in crude inventories

Crude prices dropped substantially on Wednesday, 03 June, 2009 as energy department reported sudden rise in crude inventories for last week. Market was expecting a decline in crude inventories. Prices also fell today due to the firming up of the dollar.

On Wednesday, crude-oil futures for light sweet crude for July delivery closed at $65.7/barrel (lower by $2.86 or 4.2%). Last week, crude ended higher by 7.5%.

Crude ended the month of May, 2009, higher by 30%. This was the largest month gain for crude in almost a decade. Prior to May, crude ended April and March, 2009 higher by 2.9% and 10.9% respectively. It rallied 11.3% in the first quarter. 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 34%.

EIA reported today that U.S. commercial crude inventories for the week ended 29 May rose to 366 million barrels, up 2.9 million barrels. Market was expecting a decline to the tune of 2 million barrels.

EIA also reported that total motor gasoline inventories decreased by 200,000 barrels on the week, while distillate supplies increased 1.6 million barrels.

In the currency market on Wednesday, the U.S. dollar index, a gauge of the greenback against six major currencies, rose as much as 1.3%, following a 6.1% drop in May. It was the first increase for the dollar in five sessions. The dollar rose today against the euro after data showed the European economy shrank 2.5% in the first quarter. The index lost 1% in April and 2.9% in March.

OPEC, in its latest meeting, decided to keep production quotas unchanged, in line with expectations. The cartel, which accounts for about one-third of the world's oil production, decided to leave production levels unchanged at today's meeting in Vienna on Thursday, 28 May, 2009.

Also at the Nymex on Wednesday, reformulated gasoline for July delivery fell 5.72 cents, or 3%, to $1.868 a gallon and July heating oil dropped 7.78 cents, or 4.3%, to $1.7188 a gallon.

Natural-gas futures for July gas contract tumbled 35.4 cents, or 8.6%, to $3.766 per million British thermal units. The EIA will report on Thursday morning the latest data on natural gas in storage for the week ended 29 May, 2009.

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 3,102/barrel, lower by Rs 122 (3.8%) against previous day's close. Natural gas for June delivery closed at Rs 178.1/mmbtu, lower by Rs 16.7/mmbtu (8.6%).