Crude continues to slide down

Prices drop due to weak economic data

Crude prices dropped again on Thursday, 19 August 2010. Prices fell due to a spate of weak economic data that hit Wall Street on Thursday.



On Thursday, crude oil futures for light sweet crude for September delivery closed at $74.43/barrel (lower by $0.99 or 1.3%). Last week, crude ended lower by 6.7%.

For the month of July, crude ended higher by 4.5%. Before this, in 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 lower by 1.3%.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies erased earlier gains and climbed up.

The Labor Department in US reported on Thursday, 19 August 2010 that first-time filings for state unemployment benefits rose unexpectedly last week to reclaim the highest level since the middle of last November. As per the report, initial claims rose 12,000 to 500,000 for the week ended 14 August 2010.

Claims had fallen as low as the 427,000 level in mid-July but have worsened steadily since and now have increased for three straight weeks. Meanwhile, the latest four-week moving average for initial claims rose 8,000 to stand at 482,500. This is the highest level since December 2009.

In addition to this, the surprisingly weak Philly Fed report, as well as a simultaneously released leading economic indicators report combined to rattle U.S. stocks on Thursday.

The Federal Reserve Bank of Philadelphia in US reported on Thursday, 19 August 2010 that the factory sector in the Philadelphia region showed unexpected weakness in August falling into negative territory for the first time in a year. As per the report, the Philly Fed's business activity index fell to negative 7.7 in August from positive 5.1 in July, well below the positive 7 expected.

The surprisingly weak Philly Fed report, as well as a simultaneously released initial claims report combined to rattle U.S. stocks. At the same time as the Philly Fed report, the Conference Board reported its leading economic index rose 0.1% in July against an expected forecast of a 0.2% advance.

The Energy Information Administration on Wednesday reported a smaller-than-expected decline for oil inventories in the week ended 13 August. The EIA said oil inventories declined by 800,000 barrels. The EIA also reported gasoline stockpiles "virtually unchanged" for the week and an increase of 1.1 million barrels for distillates, which include heating oil and diesel.

On Thursday, gasoline for September delivery retreated 3 cents, or 1.7%, to $1.93 a gallon, forfeiting gains of the past two sessions.

Meanwhile, September natural gas lost 7 cents, or 1.6%, to settle at $4.17 per million British thermal units despite a smaller-than-expected increase in the product in storage.

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 September delivery closed lower by Rs 46 (1.3%) at Rs 3,505/barrel. Natural gas for August delivery closed at Rs 195.8, lower by Rs 1.5 (0.8%).