Crude shoots up

Prices witness good increase after Fed's comments

Crude prices ended higher on Tuesday, 16 March 2010. Prices rose as the dollar slipped following comments from Federal Open Market Committee, which hit the wires in the noon hours.

On Tuesday, crude-oil futures for light sweet crude for April delivery closed at $81.7/barrel (higher by $1.9 or 2.3%). During intra day trading, it rose to a high of $82.09. 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 70% in last one year.

The latest FOMC policy statement that came out today was little changed from previous directives. The Fed has left its target federal funds rate unchanged at a range of 0.00% to 0.25% and the Fed said that it continues to expect an exceptionally low level of interest rate for an extended period.

In the currency market on Tuesday, the dollar index slipped by almost 0.6% following Fed's comments.

According to the latest dose of U.S. data, investors were relieved to see U.S. import prices last month post their first monthly drop since July, reducing the specter of inflationary pressures. But housing starts declined more than expected - a reminder that the U.S. real-estate market remains under pressure.

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 Tuesday, gasoline for April delivery 6.7 cents to $2.27 a gallon and heating oil for the same month rose 5.2 cents to $2.11 a gallon.

Also on Tuesday, natural gas for April delivery bucked the trend, falling 4.1 cents to $4.35 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.

At the MCX, crude oil for March delivery closed Rs 74 (2.03%) higher at Rs 3,719/barrel. Natural gas for March delivery closed at Rs 198.5/mmbtu, lower by Rs 4 (1.97%).