Volatile crude ends lower

Prices fluctuate due to inventory concerns and weak dollar

Crude oil prices dropped for the fourth straight day on Monday, 12 April 2010. Prices pared all its early gains and ultimately ended lower. Prices fluctuated throughout the day as some traders anticipated that tomorrow's weekly inventory report would show rise in crude inventories. On the other hand, dollar also fell.

On Monday, crude-oil futures for light sweet crude for May delivery closed at $84.34/barrel (lower by $0.58 or 0.7%). During intra day trading, prices rose to a high of $85.71. Last 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 6.1%.

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 Monday, the dollar index, which measures the strength of the dollar against basket of six other currencies fell by almost 0.5%. The euro rose against the greenback as the European countries decided to provide a $60 billion lifeline to Greece over the weekend. The euro rose to three week high against the dollar. The dollar index gained about 0.7% in March and rallied 4% during the first quarter. The dollar index has gained 4.5% this year till date.

Last Friday, Fitch Ratings had downgraded Greece's credit ratings to the lowest ring of investment-grade ratings, BBB minus.

Market is expecting tomorrow's weekly inventory report to show that crude stockpiles will increase by 1.6 million barrels, while gasoline stocks will be down by 1.26 million barrels for last week. Distillates stocks, which include heating oil and diesel, are expected to be up by 1 million barrels.

Among other energy products, gasoline for May delivery added a penny, or 0.3%, to $2.29 a gallon. Heating oil for May delivery declined by a penny, or 0.3%, to $2.21 a gallon.

Elsewhere, natural gas for May delivery declined 6 cents, or 1.5%, to $4.0080 per million British thermal units. The contract hit an intraday high of $4.18 per million Btus. The morning bump for natural gas prices came on the back of updated temperature forecasts that suggest this week's government report on storage levels may come in below average.

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.

At the MCX, crude oil for April delivery closed higher by Rs 6 (0.16%) at Rs 3,758/barrel. Natural gas for April delivery closed at Rs 177.2/mmbtu, lower by Rs 3.9 (2.15%).