Crude drops for third straight day

Prices manage to eke out little weekly gains

Crude oil prices dropped for the third straight day on Friday, 09 April 2010. Prices pared all its early gains due to demand concerns as concerns regarding global recovery resurfaced once again and as the dollar weakened.

On Friday, crude-oil futures for light sweet crude for May delivery closed at $84.92/barrel (lower by $0.55 or 0.5%). During intra day trading, prices rose to a high of $86.45. For the week, crude ended higher by just 0.6%. For the month of March, crude rose 5.1%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 6.8%.

Prices are still very much lower as compared to 3 July, 2008 settlement of $145.29 a barrel and an intraday high of $147.27 on 11 July, 2008, an all-time high. However, oil has also gained nearly 155% from a December, 2008 nadir. That day prices settled at $33.87 a barrel following an intraday low of $32.40.

In the currency market on Friday, the dollar index, which measures the strength of the dollar against basket of six other currencies fell by almost 0.4%. The dollar index gained about 0.7% in March and rallied 4% during the first quarter. The dollar index has gained 5% this year till date.

Fitch Ratings on Friday downgraded Greece's credit ratings to the lowest ring of investment-grade ratings, BBB minus. A downgrade for Greece heightened concerns about the euro-zone countries and the global economic recovery, thereby affecting commodity prices.

During the week, the EIA reported an increase in crude stockpiles of 2 million barrels in the week ended 2 April against an expected figure of 1.5 million barrels. It was the 10th consecutive increase in oil supplies. The EIA also reported a decrease in gasoline inventories of 2.5 million barrels. The agency reported an increase in distillates, which include heating oil and diesel, of 1.1 million barrels. The refinery use was also bearish for prices, coming in as 84.5% of capacity, or a nearly 2% increase.

Elsewhere, natural gas for May delivery gained 16 cents, or 4.1%, to settle at $4.07 per million British thermal units. Prices have gained 0.8% for the week.

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