Crude plunges

Prices drop as inventories rise

Crude prices plunged at Nymex on Wednesday, 23 September, 2009. Prices fell as energy department's weekly inventory report showed that crude stockpiles rose last week.

On Wednesday, crude-oil futures for light sweet crude for November delivery closed at $68.97/barrel (lower by $2.79 or 3.9%). Earlier during the day, it fell to a low of $68.57/barrel. Last week, crude ended higher by 4%.

For the month of August, 2009, crude ended higher by a marginal 0.7%. For the second quarter, crude ended higher by 40%. 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 58% since then. Year to date, in 2009, crude prices are higher by 46.8%.

In the latest weekly inventory report, EIA announced today that crude supplies rose 2.8 million barrels in the week ended 18 September, 2009. Gasoline inventories gained 5.4 million barrels, and distillate stockpiles, which include diesel and heating oil, rose 3 million barrels..

In the currency market on Wednesday, the dollar erased early gains. The dollar index, which measures the strength of dollar against a basket of other currencies, fell by almost 0.2%.

In a statement released after a two-day policy meeting, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. It also announced that it has extended its purchase of mortgage-backed securities and agency debt into the first quarter of 2010 from December. In the statement, Fed officials said that economic activity has picked up with improved conditions in financial markets. Lower interest rates tend to hurt the dollar and boost gold's value as a hedge against a weak currency and inflation.

Among other energy products on Wednesday, October-reformulated gasoline fell 7.67 cents, or 4.3%, to $1.7049 a gallon, and October heating oil lost 5.27 cents, or 2.9%, to $1.7594 a gallon.

Also on Wednesday, October natural gas soared 25.1 cents, or 7%, to $3.86 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 October delivery closed lower by Rs 110 (3.2%) at Rs 3,335/barrel. Natural gas for September delivery closed higher by Rs 17.7 (10.4%) at Rs 187.4/mmbtu.