Crude ends lower for sixth straight day

Prices erase earlier gains as dollar spikes up

Crude oil prices ended substantially lower at Nymex on Tuesday, 18 May 2010. Prices erased earlier gains after the euro continued its backslide against the dollar. Prices fell as tomorrow's weekly inventory report is expected to show another piling of crude inventories. Prices slipped 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. Prices rose earlier on the back of stronger than expected economic data.

On Tuesday, crude-oil futures for light sweet crude for June delivery closed at $69.41/barrel (lower by $0.67 or 1%). With today, prices fell for sixth straight session. 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 1.6%.

Prices have shed almost 17% 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.

Clouds of uncertainty hanging over Europe dissipated a bit today as Greece said that it received 14.5 billion euros in loans from the European Commission and that its short-term financing needs are covered.

The news saw some renewed strength in the euro. However, the euro soon resumed its backslide. Its downturn steepened following news that Germany will ban naked short selling of certain financial stocks, credit default swaps, and government bonds. The euro dropped a sharp 1.5% to a fresh four-year low that was just above 1.2200 per dollar. In the currency market today, the Dollar Index spiked 1.1% to a fractionally improved 52-week high.

Among economic data for the day, The Commerce Department in US reported on Tuesday, 18 May 2010 that U.S. housing starts increased for the second straight month in April but building permits fell sharply. Hitting an 18-month high, housing starts rose an estimated 5.8% to a seasonally adjusted annual rate of 672,000 from an upwardly revised 635,000 in March. April's starts marked the highest level of new construction since October 2008, when the financial crisis worsened. Starts of single-family homes rose 10.2% in April to a 593,000-unit annual rate, the highest since August 2008.

However, building permits fell 11.5% to a seasonally adjusted annual rate of 606,000, the lowest in six months. Permits for single-family homes, also dropped, down 10.7% to a 484,000 annual rate. Housing starts are up 40.9% compared with the record low in April 2009, but they're down about 70% from the peak in 2006. Building permits are up 15.9% compared with a year earlier.

Separately, the Labor Department in US reported on Tuesday, 18 May 2010 that wholesale prices fell slightly in April as the cost of energy and food eased. The main producer price index fell 0.1%, seasonally adjusted. The more closely followed core rate, which excludes volatile energy and food prices, rose 0.2%. Over the past 12 months, wholesale prices have risen 5.5%, on an unadjusted basis. Yet the core rate has risen only 1% in the past year.

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.

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 19 (0.6%) at Rs 3,199/barrel. Natural gas for May delivery closed at Rs 199.5, lower by Rs 0.9 (0.44%).