Crude surges to highest level in one month

Strong earning data boosts prices




Crude oil prices ended substantially higher on Thursday, 22 July 2010 at Nymex. Strong batch of earning reports at Wall Street fuelled demand for crude in anticipation that energy demand will rise in coming months.

On Thursday, crude oil futures for light sweet crude for September delivery closed at $79.3/barrel (higher by $2.74 or 3.6%). This was crude's highest price in nearly one month. Last week, prices gained 1.1%.

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 0.9%.

Among the major earning reports expected for the day, UPS bested expectations for the bottom line, and also came out with an increased outlook. Dow components 3M and Caterpillar also reported better-than-expected bottom line results. 3M also issued upside guidance, while Caterpillar raised its forecast so that it is in step with what Wall Street has forecast.

Among other blue chips, AT&T posted an upside surprise and raised its outlook, but Travelers came short of the consensus earnings estimate and even cut its forecast.

Among economic data expected for the day, The Labor Department reported on Thursday, 22 July 2010 that the number of people submitting initial applications for state unemployment insurance benefits jumped 37,000 to stand at a higher-than-expected 464,000 for the week ended 17 July 2010. Market had expected first-time claims to come in higher around a level of 450,000.

The average number of workers filing claims over the past four weeks (continuing claims) rose 1,250 to 456,000. The four-week average is considered a better gauge of the state of the labor market than the volatile weekly number.

Also, the National Association of Realtors reported on Thursday, 22 July 2010 that resale of U.S. homes fell 5.1% in June to a seasonally adjusted annual rate of 5.37 million units. That is a better rate than the 5.09 million units that had been widely expected.

In the latest inventory report, the EIA reported yesterday a rise of 400,000 barrels of oil for last week, although a sizeable decrease had been widely expected. The report also showed that gasoline inventories rose 1.1 million barrels and stockpiles of distillates, which include diesel and heating oil, rose 3.9 million barrels. Market had expected an increase of 1 million for gasoline stocks and 1.6 million for distillate stocks.

Fed Chairman Bernanke, made his semiannual monetary policy report to the Senate Banking Committee yesterday. Bernanke spoke of continued uncertainty in the economy and made note of the Fed's preparations to take more policy actions as needed.

Among other energy products on Thursday, reformulated gasoline for September delivery, also the most active contract, rose 8 cents, or 3.7%, to $2.14 a gallon. That was gasoline's highest close in a month.

On Thursday, natural gas for September delivery rose 13 cents, or 2.9%, to $4.63 per million British thermal units. That was natural gas' best finish since early July. Energy Information Administration on Thursday reported an increase of 51 billion cubic feet in inventories for the week ended 16 July. That compares to the 70-bcf addition in the same week of 2009 and a five-year average increase of 64 bcf.

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 August delivery closed higher by Rs 58 (1.7%) at Rs 3,701/barrel. Natural gas for July delivery closed at Rs 217.1, higher by Rs 3.7 (1.7%).