Crude retreats

Economic data offsets effect of IEA report

Crude prices pared earlier gains and ended lower on Friday, 12 March 2010. Prices fell after weak economic data dampened overall sentiment. Earlier in the day prices rose as International Energy Agency increased demand forecast for crude and due to higher retail sales data.

On Friday, crude-oil futures for light sweet crude for April delivery closed at $81.24/barrel (lower by $0.87 or 1%). Prices lost 0.4% for the 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 71.7% in last one year.

IEA was the latest one to raise demand forecast for crude. 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.

During the week, OPEC reported that it now expects world oil demand to grow by 900,000 barrels a day in 2010. This represents an upward revision of 100,000 barrels a day from the previous assessment.

Before that, in the latest monthly report, the EIA had reported that it now expects oil consumption growth of 1.5 million barrels a day this year, up from 1.2 million barrels a day in last month's outlook. As per the report, with that demand, oil prices should stabilize above $80 a barrel. The report also detailed that with this, price of crude oil is to average above $80 a barrel this spring, then rise to about $82 a barrel by the end of the year. Crude should climb to $85 a barrel by the end of 2011.

In the latest weekly inventory report, the EIA reported during the week that crude-oil supplies were up 1.4 million barrels in the week ended 5 March as against an expected figure of 2.1 million barrels. The EIA also reported a drop of 2.9 million barrels in gasoline stocks and a drop of 2.2 million barrels in supplies of distillates, which include heating oil.

On Friday, commodities first added to gains after a report that U.S. retail sales rose a better-than-expected 0.3% last month. But a survey from Reuters and the University of Michigan that showed sentiment among consumers unexpectedly fell in March reversed the trend.

In the currency market on Friday, the dollar was down for its third straight session as the euro and British pound bounced amid news that industrial production in Europe spiked a sharper-than-expected 1.7% in January. Reports that Goldman Sachs have instructed clients to buy the euro also weighed on the greenback. The dollar index slipped by almost 0.6%.

Among other energy products on Friday, gasoline for April delivery was down 2.2 cents at $2.25 a gallon and heating oil for the same month fell 2.1 cents to $2.09 a gallon.

Also on Friday, natural gas for April was down 4 cents at $4.40 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 45% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.