Crude flirts around $85

Crude settles with good gains on demand hopes

Crude oil prices ended substantially higher on Thursday, 01 April 2010 and crossed the $85 mark after a long time. Prices rose as the dollar weakened and due to positive global economic data which boosted overall sentiments.

On Thursday, crude-oil futures for light sweet crude for May delivery closed at $84.87/barrel (higher by $1.11 or 1.3%). During intra day trading, it surpassed the $85 mark. 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%.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against basket of six other currencies slipped by 0.3%. The dollar index gained about 0.7% in March and rallied 4% during the first quarter.

Among economic reports scheduled on Thursday, news of a pleasing eurozone Purchasing Managers Index (PMI) and a restated commitment by China to loose monetary policy led the positive mood among market participants in the early going. The best ISM Manufacturing Index reading in five years also gave reason to push stocks even higher. At 59.6, the index also exceeded expectations.

Among other economic data, construction spending for February was a sharper-than-expected 1.3%. Initial jobless claims count of 439,000 for the week ended 27 March was in-line with the consensus forecast.

In the latest weekly inventory report, the EIA reported a day before that crude-oil inventories increased by 2.9 million barrels in the week ended 26 March, in line with market expectations. Inventories of distillates, which includes diesel and heating oil, decreased by 1.1 million barrels, also in line with expectations. Out of this, gasoline inventories increased by 300,000 barrels.

Market had expected an increase of 2.65 million barrels in crude inventories. They also projected declines of 2 million barrels for gasoline stocks and 1.2 million barrels for distillate supplies.

Elsewhere, natural gas ended up 22 cents, or 5.6%, to $4.086 per million British thermal units after a government report showed a smaller-than-expected rise in storage. Natural gas futures started on the red but quickly posted gains after the Energy Information Administration reported a net increase of 12 billion cubic feet for the week ended 26 March. Market had expected a rise of 14 to 18 billion cubic feet. Natural gas had lost 31% in the first quarter of the year.

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.