Crude rises on weak dollar

Prices rise due to drop in crude stockpiles and weak dollar

Crude oil prices ended substantially higher on Wednesday, 09 June 2010 at Nymex. Prices rose due to the weak dollar and unexpected drop in crude inventories for last week.



On Wednesday, crude-oil futures for light sweet crude for July delivery closed at $74.38/barrel (higher by $2.39 or 3.3%). Prices reached a high of $74.99 during intra day trading. Last week, prices shed 3.3%. However, the contract seemed to stabilize after last week's sharp decline in the wake of a lackluster U.S. jobs report and renewed European debt concerns.

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 5.8%.

The EIA reported on Wednesday that the nation's oil stockpiles fell 1.8 million barrels in the week ended 4 June. The figure was much more than expected. Refineries operated at 89.1% of their capacity. Gasoline inventories were unchanged from last week, while distillate stockpiles increased by 1.8 million barrels. Data on gasoline also were relatively bearish as markets were expecting a decline around 500,000 barrels. The distillates increase came in larger than expected and above the five-year average gain for the period.

Also on Wednesday, the Organization of the Petroleum Exporting Countries released its monthly oil-market report that showed the cartel as keeping its estimate for world oil demand. The OPEC expects demand to increase by 950,000 barrels a day this year, but cautioned that an expected moderation in the pace of the economic recovery is likely to impact demand growth forecasts for the second half of 2010.

OPEC also cut its supply forecast as production from non-OPEC countries increased by 110,000 barrels a day from the last month. The cartel's oil-reference basket fell below $67 a barrel in late May, its lowest level since early October 2009

A day before, on Tuesday, the Department of Energy's Energy Information Administration released its monthly energy outlook report, which lowered government oil price projections for the second half of the year. The EIA said prices are likely to average $79 a barrel in the second half of 2010, from expectations of $84 a barrel in last month's report.

Latest reports indicated that there was a 50% surge in Chinese exports in May, much more than what was expected.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six currencies, fell by 0.7%.

Among other energy related products, reformulated gasoline for July delivery rose 5 cents, or 2.5%, to settle $2.04 a gallon. Heating oil for July delivery added 4 cents, or 2.3%, to $2 a gallon.

Natural gas for July delivery added 13 cents, or 2.7%, to $4.67 per million British thermal units. The EIA is scheduled to report on natural gas in storages at 10:30 a.m. Eastern on Thursday.

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 June delivery closed higher by Rs 128 (3.8%) at Rs 3,503/barrel. Natural gas for June delivery closed at Rs 220.8, lower by Rs 5.6 (2.5%).