Spain pain weighs on crude

Crude registers biggest monthly drop since December 2008

Crude oil prices fluctuated for entire session but ultimately ended lower at Nymex on Friday, 28 May 2010. A downgrade for Spain's debt brought back concerns about a potential European debt crisis weighing on oil demand. Today's session marked the final trading day of the month since markets will be closed on Monday, 31 May in observance of Memorial Day.

On Friday, crude-oil futures for light sweet crude for July delivery closed at $73.97/barrel (lower by $0.58 or 0.8%). For the week, crude gained 5.6%.

For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. 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 higher by 5%.

Fitch Ratings on Friday downgraded Spain's debt to AA+ from AAA, citing concerns about the country's level of debt relative to its gross domestic product.

In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.4%.

Among economic reports for the day, The Reuters/University of Michigan consumer sentiment index reported that U.S. consumer sentiment rose in May from the prior month. The report stated that the UMich index rose to 73.6 in late May from 72.2 in April. This May's reading is up from 68.7 in May 2009. However, it is below the long-term average of about 87. The report detailed that index of consumer expectations rose to 68.8 in May from 66.5 in April, while the current conditions index remained at 81.

Separately, the Commerce Department reported that consumer spending was weaker than expected in April but rising personal incomes hinted that the economy could actually be on firmer ground. Consumer spending was flat in April after six straight monthly increases. Total personal income rose by a seasonally adjusted 0.4% in April to an annual rate of $12.27 trillion. Incomes were in line with expectations.

Earlier during the week, the EIA reported in its weekly inventory report that crude stockpiles showed an increase of 2.4 million barrels in the week ended 21 May against an increase of 100,000 barrels. The report also showed that gasoline stocks fell 200,000 barrels, while distillates stocks fell 300,000 barrels. The EIA also reported a rise in demand for gasoline and other oil products. Over the last four weeks, gasoline demand was up by 1.2% over the same period last year. Distillate fuel demand in the four-week period rose 16%. Total products supplied over the last four-week period were up 7% compared to last year's.

Among other energy products on Friday, Gasoline for July delivery lost a penny, or 0.4%, $2.03 a gallon. Heating oil for June delivery retreated 2 cents, or 1%, to $1.98 a gallon. Gasoline lost more than 15% in May, although it posted a 4.1% weekly increase. Heating oil prices declined 15% for the month, and gained 3.6% on the week.

Natural gas for July delivery added 5 cents, or 1.1%, to $4.34 per million British thermal units. Natural gas gained nearly 11% for the month, and it advanced almost 6% on the week.

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.