Crude continues to slide down

Prices drop on global recovery worries

Crude oil prices ended substantially lower at Nymex on Monday, 17 May 2010. Prices fell as the dollar rose substantially and traders continued to mull over the pace of euro zone's recovery and its impact on the currencies, especially on the euro. Slower the pace of global recovery, lesser will be the demand for oil.

On Monday, crude-oil futures for light sweet crude for June delivery closed at $70.08/barrel (lower by $1.53 or 2.1%). During intra day trading, prices slipped to a low of $69.27. Last week, crude shed 4.6%. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is lower by 2.6%.

Prices have shed almost 16% since it hit a high of $86.5 during first week of April this year. Prices are also 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 135% 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 today, the euro dropped once again against the dollar. The dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.6%.

Among economic data for the day, The National Association of Home Builders on Monday reported a gain in confidence among U.S. home builders in May, with the trade group's index hitting a 33-month high. The housing market index rose three points in May to 22 after a four-point increase in April. At 22, the index is at its highest point since August 2007, but it's still very weak in historic context. Before the current downturn, the index had been at 22 or lower just twice in its 25-year history.

Last week, The International Energy Agency lowered by 220,000 barrels a day its forecast for global oil demand for 2010. Oil demand is estimated to grow from 2009 by 1.9%, equating to 1.6 million barrels a day, to 86.4 million barrels a day.

In contrast, the U.S. Energy Information Agency had raised its outlook for global oil demand to 1.6 million barrels per day in 2010, slightly higher than the 1.5 million barrels-a-day projection made last month. Separately, The Organization of the Petroleum Exporting Countries had also said last week it was raising its estimate for global oil demand for 2010. OPEC expects global oil demand to grow by 950,000 barrels a day to 85.38 million barrels a day. It previously expected growth of 900,000 barrels a day.

Among other energy products on Monday, reformulated gasoline for June delivery declined 9 cents, or 4.1%, to settle at $2.0431 per gallon. Natural gas for June delivery added 9 cents, or 2%, to settle $4.3980 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. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for May delivery closed lower by Rs 46 (1.4%) at Rs 3,218/barrel. Natural gas for May delivery closed at Rs 200.4, higher by Rs 3.5 (1.8%).