Crude slips again

Economic data weighs on crude prices but natural gas rallies

Crude oil prices once again ended lower on Thursday, 15 July 2010 at Nymex. Prices dropped due to mixed batch of economic data that hit Wall Street today.



On Thursday, crude oil futures for light sweet crude for August delivery closed at $76.62/barrel (lower by $0.42 or 0.6%). Last week, prices gained 5.5%.

For the month of June, oil prices shed 2.7%. Crude ended second quarter of CY 2010 lower by 9.3%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 5.9%.

On Thursday, Wall Street was flooded with a number of economic data, which were mixed in nature. Oil posted steeper declines after the Philadelphia Federal Reserve Bank said manufacturing in the Philadelphia region grew at a slower pace in July.

The Labor Department in US reported on Thursday, 15 July 2010 that the number of people submitting initial applications for state unemployment insurance benefits fell 29,000 to 429,000 last week, hitting the lowest level since August 2008. Market had expected first-time claims at a level of 445,000 for the week ended 10 July. Meanwhile, the four-week average of initial claims, a better gauge of employment trends than the volatile weekly number, also fell, down 11,750 to stand at 455,250.

Separate report showed that industrial production rose 0.1% in June, beating expectations of a decline. The Federal Reserve Bank of New York said that New York manufacturing expanded in July, but at a much slower pace than previous months.

Also, the Labor Department reported that U.S. wholesale prices fell 0.5% in June, the largest decline since February, led by food prices. The core price index, which excludes energy and food prices, rose 0.1%.

In the currency market on Thursday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 1.1%.

In the latest FOMC meeting, Fed indicated yesterday that real US GDP for 2010 is now expected to range from 3.0% to 3.5%, which is down from the previous range of 3.2% to 3.7%, while the projection for 2011 GDP ranges from 3.5% to 4.2% after it had previously ranged from 3.4% to 4.5%. As for unemployment, the 2010 projection rate ranges from 9.2% to 9.5% after it had ranged from 9.1% to 9.5%. The expected unemployment rate for 2011 ranges from 8.3% to 8.7% after it had ranged from 8.0% to 8.5% before. FOMC members agreed that it would be appropriate to keep the target federal funds rate at a range of 0.00% to 0.25%. Crude pared its earlier gains following these comments.

In the latest weekly inventory report, the EIA reported on Wednesday a decline of 5.1 million barrels in crude inventories in the week ended 9 July against an expected drop of 2.6 million barrels. The EIA also reported an increase of 1.6 million barrels for gasoline supplies and a rise of 2.9 million barrels for inventories of distillates, which include heating oil and diesel. Market had projected increases of 950,000 barrels in gasoline supplies and 800,000 barrels in distillate supplies.

On Thursday, reformulated gasoline for August delivery lost a penny, or 0.3%, to $2.06 a gallon.

Natural gas August contract rallied 6.5% today, adding 28 cents to $4.59 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 July delivery closed lower by Rs 66 (1.8%) at Rs 3,558/barrel. Natural gas for July delivery closed at Rs 215.6, higher by Rs 12.5 (6.05%).