Crude shoots up

Prices rise as Goldnam Sachs increases price forecast of crude

Crude prices rose substantially on Thursday, 04 June, 2009. Upbeat economic data on the job front from Labor Department and an increase in the price forecast of crude by Goldman Sachs took crude prices higher today. The lower dollar also played a role in crude prices firming up.

On Thursday, crude-oil futures for light sweet crude for July delivery closed at $69.15/barrel (higher by $3.03 or 4.6%). 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 50% since then. Year to date, in 2009, crude prices are higher by 38.6%.

Today Goldman Sachs increased its 2009 oil price forecast to $85 a barrel, up from $65 a barrel previously.

The Labor Department reported on Thursday, 04 June, 2009 that the number of continuing claims for state unemployment benefits declined by 15,000 to 6.74 million for the week ended 23 May, 2009. However, the four-week average of these claims rose by 88,750 to 6.69 million, a record-high level. First-time applications for benefits fell 4,000 to 621,000 in the week ended 30 May, 2009, reaching the lowest level since early May. The four-week average of these first-time claims rose 4,000 to 631,250. After reaching new weekly record highs since January, the number of continuing claims for state unemployment benefits has finally declined.

In the currency market on Thursday, the U.S. dollar index, a gauge of the greenback against six major currencies, continued its recent strength initially following Asian nation announcements that they didn't see an alternative to the greenback as a reserve currency. But then the dollar slipped after the European Central Bank decided to keep benchmark interest rates at 1%. The dollar had risen yesterday for first time in five sessions after data showed the European economy shrank 2.5% in the first quarter. The index lost 1% in April and 2.9% in March.

EIA had reported yesterday 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.

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 Thursday, July reformulated gasoline rose 7.19 cents, or 3.8%, to $1.9735 a gallon, and July heating oil gained 6.16 cents, or 3.5%, to $1.7998 a gallon.

Natural-gas futures reversed their earlier losses today. The July contract gained 3.4 cents, or 0.9%, to $3.81 per million British thermal units. It had fallen more than 5% earlier after government data showed gas in storage rose more than expected last week. EIA reported today that inventories rose 124 billion cubic feet in 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 3,261/barrel, higher by Rs 159 (5.1%) against previous day's close. Natural gas for June delivery closed at Rs 180.1/mmbtu, higher by Rs 2/mmbtu (1.1%).