Crude falters

Prices end lower as dollar firms up

Crude oil prices ended lower on Thursday, 18 March 2010. Prices fell as the dollar went up following renewed concerns over Greece's fiscal problems. Prices could not recover despite better than expected economic data.

On Thursday, crude-oil futures for light sweet crude for April delivery closed at $82.2/barrel (lower by $0.73 or 0.9%). Prices lost 0.4% last week.

Crude prices rose 9.3% in February as supply-and-demand issues began to take hold in a market for months dominated by moves in the dollar. Prices have ranged between $69 and $84 a barrel since October. Crude has risen 71% in last one year.

Doubts about the euro zone's aid plan for the debt-strapped Greek government resurfaced amid talk that Greece might resort to help from the International Monetary Fund.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against basket of six other currencies rose by 0.6%.

Among economic data for the day, the Labor Dept reported that in the week ended 13 March, initial claims dropped to a seasonally-adjusted 457,000 from 462,000 in the prior week.

Other than that, the Conference Board's index of leading economic indicators climbed 0.1% in February for an 11th consecutive monthly rise, with the private research group predicting conditions will improve modestly in the near term. Also, manufacturing activity in the Philadelphia region improved for a seventh consecutive month, according to the Federal Reserve Bank of Philadelphia.

In the latest weekly inventory report, the EIA reported yesterday that U.S. crude inventories rose by 1 million barrels in the week ended 12 March. Market had been looking for an increase of 1.9 million barrels.

The EIA also said the week's gasoline supplies fell by 1.7 million barrels and distillate stocks dropped by 1.5 million barrels. Market had expected declines of 1.5 million barrels for gasoline and 1.6 million barrels for distillates.

Yesterday, Organization of Petroleum Exporting Countries decided to keep its production quota unchanged.

IEA was the latest one to raise demand forecast for crude last week. The IEA revised up by 70,000 barrels a day its oil demand forecast for 2010, pointing to growth in Asia. As per the report, global oil demand is expected to rise by 1.6 million barrels a day, or 1.8% year-on-year, to 86.6 million barrels a day in 2010. In contrast, demand is estimated to have contracted by 1.2 million barrels a day, or 1.4% year-on-year, to 85.0 million barrels a day in 2009.

The report detailed that after five consecutive quarters of decline, global oil demand began growing again on a yearly basis in the fourth quarter of 2009. However, this year's demand growth will be fueled entirely by emerging countries, particularly those in Asia.

Among other energy products on Thursday, gasoline for April delivery fell 0.9 cents to $2.30 a gallon, while heating oil for the same month fell 1.9 cents to $2.12 a gallon.

Also on Thursday, natural gas for April delivery fell 21.3 cents, or 5%, to $4.09 per million British thermal units. It earlier traded as high as $4.33 per million Btus. Natural-gas futures fell 5% after the EIA said U.S. supplies of natural gas in storage fell by 11 billion cubic feet, much less than expected.

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 45% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for April delivery closed Rs 5 (0.13%) higher at Rs 3,765/barrel. Natural gas for March delivery closed at Rs 186.7/mmbtu, lower by Rs 8.9 (4.5%).