Crude continues to slip

Prices drop as economic data increases recovery concerns

Crude oil prices ended substantially lower on Thursday, 12 August 2010. Prices fell to one-month low as the dollar strengthened and economic data disappointed.



On Thursday, crude oil futures for light sweet crude for September delivery closed at $75.74/barrel (lower by $2.28 or 2.9%). Last week, crude ended higher by 2.2%.

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 0.5%.

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

The Labor Department in US reported on Thursday, 12 August 2010 that the number of initial claims for regular state unemployment insurance benefits rose 2,000 to 484,000 in the week ended 7 August. It reached the highest level since February. Market had expected a level of 463,000.

The four-week average of initial claims, a more accurate gauge of employment trends, rose 14,250 to 473,500, also the highest level since February. For the prior week, the initial claims level was revised higher to 482,000 from a previous estimate of 479,000. The number of workers who continued to receive state unemployment checks fell by 118,000 to 4.45 million in the week ended 31 July. The four-week average of these continuing claims fell 64,500 to 4.52 million.

In addition, the Labor Department in US reported on Thursday, 12 August 2010 that prices of goods imported into the United States increased 0.2% in July, after two months of declines. Fuel-import prices rose 2.1% in July, while prices for non-fuel imports fell 0.3%. Import prices are up 4.9% in the past year, with a gain of 14.8% for fuel imports, and a 2.8% increase for non-fuel imports. Export prices fell 0.2% in July, including a 0.1% decline for agriculture exports, and a 0.2% decline for non-agricultural exports. In June, export prices were down 0.7%. For the year, export prices are up 3.9%.

In the latest weekly inventory report, EIA reported yesterday a decrease of 3 million barrels of oil in inventories for the week ended 6 August 2010. The EIA also reported an increase of 400,000 barrels for gasoline inventories, and a rise of 3.5 million barrels for stockpiles of distillates, which include heating oil and diesel. Market had expected a drop of 1.5 million for gasoline stocks, and an increase of 1.1 million barrels for distillates.

The International Energy Agency early Wednesday revised slightly upwards its forecasts for global oil demand for 2010 and 2011, but warned that there is a significant downside risk to these estimates if the economic recovery falters in the second half of the year.

Earlier during the week, the Energy Information Administration predicted a slight increase in global oil demand in the next couple of years and raised its forecast for average oil prices for the rest of the year and 2011. As per the agency, it sees oil at an average of $81 a barrel in the fourth quarter of 2010 and $84 a barrel in 2011, slightly above last month's forecast. The agency also predicted that the U.S. is likely alone among developed nations in showing "significant increases in oil consumption" of about 150,000 barrels a day in 2010 and 2011.

The EIA also slightly increased its projected world oil consumption to 1.6 million barrels a day, compared to 1.5 million the month before. OPEC and non-OPEC supply expectations were also raised, however.

On Thursday, reformulated gasoline for September delivery declined 4 cents, or 2.1%, to $1.95 a gallon, hitting an 11-week low and trading below $2 for the first time since early July.

Also on Thursday, natural-gas futures closed at their lowest in 10 weeks, with the September contract declining 3 cents, or 0.7%, to $4.296 per million British thermal units. The Energy Information Administration reported a rise of 37 billion cubic feet in the week ended 6 August against an increase between 32 to 36 billion cubic feet.

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.