Crude tumbles

Prices sink as dollar stings

Crude oil prices ended substantially lower at Nymex on Friday, 14 May 2010. Prices fell as the dollar rose substantially and traders continued to mull over long-term implications of the European Union's rescue package for Greece and its impact on the currencies, specially on the euro. Better than expected economic data failed to charge up prices.

On Friday, crude-oil futures for light sweet crude for June delivery closed at $71.61/barrel (lower by $2.79 or 3.8%). For the 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 4.7%.

Prices are 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 137% 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 euro dropped once again against the dollar and reached the lowest level since October 2008. The dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 1%.

Among economic data for the day, the Commerce Department reported on Friday that U.S. retail sales rose a seasonally adjusted 0.4% to $366.4 billion in April, the seventh straight increase and the 12th gain in the past 13 months, led by strong sales at hardware stores and garden center. Excluding a 0.5% increase in auto sales, sales rose 0.4% to $303.5 billion. The figures were better than expected.

As per the report, sales were mixed across retail sectors last month, with a strong 6.9% gain at hardware stores and garden centers outweighing falling sales at mall-type stores. Sales at hardware stores had increased 7.8% in March.

In the latest weekly inventory report, the EIA reported earlier during the week an increase of 1.95 million barrels in the nation's oil inventories for last week, slightly above expectations. The biggest surprise was a decrease in gasoline inventories by 2.8 million barrels, whereas market was expecting a small increase. Stockpiles of distillates, which include diesel and heating oil, rose by 1.4 million barrels. The refinery utilization rate dropped more than expected to 88.4%. Meanwhile, inventories at Cushing, Okla., the delivery point for Nymex futures, rose by 784,000 barrels to a record high on 37 million barrels.

During the week, on Thursday, 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, earlier this week, the U.S. Energy Information Agency 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 on Tuesday 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 Friday, natural gas for June delivery pared down some losses to end 3 cents off, or 0.6%, to $4.31 per million British thermal units. Reformulated gasoline for June delivery declined 6 cents, or 2.9%, to $2.1308 a gallon.

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.