Crude ends winning streak

Prices manage to register good weekly gains

After four consecutive days of rise, crude oil prices fell on Friday, 12 February 2010. An interest rate move by China strengthened the dollar thereby pressuring commodities. Nevertheless, crude gained for the week. Economic data also pressured crude oil prices.

On Friday, crude-oil futures for light sweet crude for March delivery closed at $74.13/barrel (lower by $1.15 or 1.5%). For the week, crude gained 4%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is lower by 6.6%.

On Friday, the Energy Information Administration reported an increase of 2.42 million barrels in U.S. crude inventories in the week ended 5 February 2010, a bigger buildup than had been expected. The report was delayed by two days because of a snowstorm that shut down government offices in Washington, D.C.

The EIA also said gasoline supplies rose by 2.3 million barrels, while distillate stocks fell by 356,000 barrels. Market was looking for an increase of 1 million barrels for gasoline and a decline of 1.75 million barrels for distillates.

In the latest monthly report, Paris-based IEA reported on Thursday, that it expects global oil demand this year to be 170,000 barrels a day higher than previously expected. Demand is estimated at 86.5 million barrels a day, representing an increase of 1.6 million barrels a day compared with 2009 levels.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies, went up by almost 0.3%. However, the greenback pared some of its gains at the end.

Heavy selling pressure was seen in Asian trade on Friday after the People's Bank of China said it would raise the ratio of reserves banks must set aside by 0.5 of a percentage point, the second such move this year.

Also, the Commerce Department reported on Friday, 12 January 2010, that U.S. businesses cut their inventories for the first time in three months, but strong sales reduced the key inventory-to-sales ratio to below its pre-recession average. Paced by a large drawdown in autos, business inventories fell 0.2% in December. Inventories had risen in October and November, which had ended a 13-month span of declines. Market was expecting inventories to remain flat.

Separately, the University of Michigan and Reuters reported on Friday that American consumers were more pessimistic about the path of the economy in February. The UMich index fell to 73.7 in February from 74.4 in January. Consumers were more upbeat about currrent economic conditions, with the current index rising from 81.1 in January to 84.1, the highest since March 2008. However, attitudes about the near-term deteriorated, with the expectations index falling to 66.9 in February from 70.1 in January. Expectations had risen three months in a row.

The EIA reported during the week that the world oil market should gradually tighten in 2010 and 2011, as the global economic recovery continues and world oil demand begins to grow again.

Among other energy products on Friday, gasoline for March delivery finished at $1.93 a gallon, down 0.5 cent, while the heating-oil contract for the same month fell 4.3 cents to $1.92 a gallon.

Also on Friday, natural gas futures bucked the trend in energy after the EIA reported a drop of 191 billion cubic feet last week. Natural gas for March delivery, which traded lower before the data, ended with a gain of 7.4 cents, or 1.3%, at $5.47 per million British thermal units.

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 48.8% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.