Crude back at $70

Prices reclaim this level on demand hopes and drop in inventory speculation

Crude prices broke its losing streak and ended higher for the first time in ten sessions on Tuesday, 15 December, 2009. Prices rose as traders mulled over the fact that tomorrow's inventory report will show drop in crude supplies. Prices also rose as OPEC raised its forecast for global oil demand for next year.

On Tuesday, crude-oil futures for light sweet crude for January delivery closed at $70.69/barrel (higher by $1.18 or 1.7%). Before today, the contract had lost almost 12% in the past nine sessions. During intra day trading, it rose to a high of $71.15. Last week, crude ended lower by 7.4%. Crude ended month of November, higher by 0.4%. In December, till now, crude has shed almost 7.8%.

Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 59% since then.

Traders anticipated today that the weekly inventory report by EIA will show a drop of crude inventories by almost 2 millions barrels for last week.

In the latest report, OPEC revised higher its forecast for world oil demand next year by 70,000 barrels a day, to 85.13 million barrels, citing demand from developing countries such as China and India. However, the cartel said the pace of recovery in developed countries, especially in the U.S., remained at risk and could dampen demand.

The cartel also said that the supply of oil from non-OPEC nations will likely expand by 500,000 barrels a day this year, slightly higher than last month's forecast. In November, OPEC crude production averaged 29.1 million barrels a day.

On last Friday, Paris-based IEA, hiked its forecast for 2010 global oil demand by 130,000 barrels a day to an average 86.3 million barrels a day. That represents an increase of 1.7%, or 1.5 million barrels a day, compared to 2009. The IEA also left its forecast for 2009 oil demand virtually unchanged at 84.9 million barrels a day, a decline of 1.6% year-on-year.

Also, earlier last week, in the latest monthly report the EIA reported that it expects oil prices to average $76 a barrel this winter from October to March. The price target came just $1 lower than the previous month's forecast. The agency expects prices will dip to $75 early next year and will then rise to $82 a barrel by December 2010.

Among other energy products on Tuesday, January gasoline added 2 cents, or 1%, to $1.8451 a gallon. January heating oil ended slightly lower, down less than 1 cent at $1.9033 a gallon.

Also on Tuesday, natural gas for January delivery rose 19 cents, or 3.6%, to $5.523 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 December delivery closed higher by Rs 35 (1.07%) at Rs 3,297/barrel. Natural gas for December delivery closed higher by Rs 11.7 (4.8%) at Rs 255.3/mmbtu.