Crude slips again

Prices drop by almost 2.3% for the week

Crude oil prices dropped once again on Friday, 05 February 2010. Prices fell as the dollar extended a strong rally on Friday led by mixed job report in US.

Strong economic reports generally tend to push crude prices higher on anticipation of higher demand in coming months and vice versa. The strong dollar further pushed crude price lower on Friday and for the week. The dollar rose to eight month high against the euro on Friday.

On Friday, crude-oil futures for light sweet crude for March delivery closed at $71.19/barrel (lower by $1.95 or 2.7%). During intra day trading, prices fell to a low of $69.5. A day earlier, crude had witnessed the biggest percentage drop in six months. For the week, crude ended lower by 2.3%. In January 2010, crude ended lower by 8.3%. On a year to date basis, crude is lower by 11.9%.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies rose by almost 0.4%.

Among economic data expected for the day, The Labor Department in US reported on Friday, 05 February 2010, that the unemployment rate in US fell to 9.7% in January 2010 from 10% in December 2009. This marked the lowest unemployment rate since August 2009. The unemployment rate had peaked at 10.1% in October 2009.

On the other hand, nonfarm payroll employment declined again, whereas market had been forecasting a small increase. As per the report, the U.S. economy lost 20,000 nonfarm jobs in January. Market was expecting an addition of around 15,000 jobs in January.

Earlier during the week, the Energy Department in US reported that crude oil inventories rose by 2.3 million barrels in the week ended 29 January 2010. Market was expecting a decline of 1 million barrels in crude stocks. In the weekly inventory report, the EIA also said inventories of distillate, which includes heating oil, fell by 948,000 barrels, while gasoline stocks fell by 1.3 million barrels. Market was expecting a buildup of 1.5 million barrels in gasoline stocks. The report also stated that refinery utilization fell to 77.7%, while it was expected to rise 0.25% to 78.75%.

Among other energy products on Friday, gasoline for March delivery fell 6.44 cents, or 3.3% to $1.8864 a gallon in New York. Heating oil for March slipped 6.04 cents, or 3.1% to $1.8748 a gallon.

Also on Friday, March natural gas was choppy putting in highs of $5.598 per MMBtu in the early morning session. The energy component couldn't hold its gains and fell into negative territory in the afternoon, but rallied back near session highs, closing at $5.518, up 1.9%.

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 53.5% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.