Crude drops further

Price drops as weak job report rekindles demand concerns

Crude prices fell lower at Nymex on Thursday, 02 July, 2009. Prices fell today as disappointing job report at Wall Street once again rekindled fears about the recovery of the economy from current recession. The strong dollar was also the reason for today's slipping crude price.

On Thursday, crude-oil futures for light sweet crude for August delivery closed at $66.73/barrel (lower by $2.58 or 3.7%). For the week, crude ended lower by 3.5%. Trading is closed on Friday in observance of the Independence Day holiday.

For the month of June, 2009, crude ended higher by 5.5%. In May, crude had registered the largest monthly gain in a decade rising 30%. For the second quarter, crude ended higher by 40%. It was the largest quarterly gain for crude since Saddam Hussain's invasion of Kuwait in 1990's third quarter. Prices rallied in second quarter due to supply concerns and weak dollar. The dollar index dropped by 6.4% in the second quarter and is lower by 1% on a y-t-d basis. Crude prices had rallied 11.3% in the first quarter of 2009.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 57% since then. Year to date, in 2009, crude prices are higher by 52%.

In the currency market on Thursday, the dollar index, a six-currency measure of the greenback's value, rose, rose by almost 1%. The dollar index dropped by 6.4% in the second quarter and is lower by 0.5% on a y-t-d basis.

The Labor Department reported on Thursday, 02 July, 2009 that the U.S. economy shed jobs at a faster pace in June than in May. As per the report, nonfarm payrolls shrank by 467,000 in June, 2009, higher than the 325,000 decline expected and the 322,000 jobs lost in May.

The unemployment rate ticked higher to 9.5% in June from 9.4% in the previous month. There was only a very slight 8,000-downward revision to payroll losses in April and May.

Energy Information Administration reported yesterday that crude oil inventories rose 200,000 barrels to 28.6 million barrels in the week ended 26 June, 2009, rising for the first week since the week in five weeks.

Meanwhile, gasoline inventories increased 2.3 million barrels and distillate stockpiles, which include heating oil and diesel, gained 2.9 million barrels. Gains in both products came bigger than expectations. The report also showed that demand for petroleum products still remained weak. Total products supplied over the last four-week period have averaged 18.4 million barrels per day, down by 5.8% compared to the similar period last year.

Also at the Nymex on Thursday, August reformulated gasoline fell 6.82 cents, or 3.7%, to $1.7908 a gallon and August heating oil dropped 6.41 cents, or 3.6%, to $1.7016 a gallon.

August natural-gas futures fell 4.7 cents, or 0.5%, to $3.615 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 July delivery closed at Rs 3,238/barrel, lower by Rs 64 (1.93%) against previous day's close. Natural gas for July delivery closed at Rs 180.1/mmbtu, lower by Rs 3.7/mmbtu (2%).