Crude oil tumbles down

Strong dollar hits crude oil prices

Crude oil prices ended lower once again on Wednesday, 20 January 2010. Prices fell as the dollar headed up strongly. Yesterday, prices had closed higher for the first time in six sessions.

On Wednesday, crude-oil futures for light sweet crude for February delivery closed at $77.62/barrel (lower by $1.4 or 1.8%). The February contract ended today. Crude ended last week lower by 5.7%. On a year to date basis till date, crude is lower by 3.9%.

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 48% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

In the currency market on Wednesday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 1.1%. The dollar strengthened on fears that China will curb bank lending. The China Banking Regulatory Commission said it hasn't "specifically" told banks to suspend lending in January, but a report said that it had asked several banks to stop issuing loans.

The Energy Department will report its weekly inventory report on crude and crude products tomorrow, a day later than normal, due to the Martin Luther King holiday on Monday. Market is expecting the report to show a build up of 2 million and 2.4 million barrels of crude and gasoline inventories respectively.

Yesterday, in the latest report, the Organization of the Petroleum Exporting Countries said that world oil demand is forecast to grow by 800,000 barrels a day this year to average 85.1 million barrels a day, representing no major change from last month's forecast.

Paris based, IEA, left its forecasts for global oil demand for 2010 virtually unchanged in its latest monthly report last week. It forecasts demand of 86.3 million barrels a day in 2010, up 1.7%, or 1.4 million barrels a day higher than 2009.

Among other energy products on Wednesday, February gasoline ended lower by 0.9% at $2.039 a gallon. Heating oil for February delivery closed lower by 1.2% at $2.021.

Also on Wednesday, natural gas for February delivery sank 3.8 cents, or 0.7%, to $5.519 per million British thermal units.

At the MCX, crude oil for February delivery closed Rs 18 (0.5%) lower at Rs 3,592/barrel. Natural gas for January delivery closed lower by Rs 5.3 (2.04%) at Rs 254.1/mmbtu.