Crude plunges

Prices drop steeply on anticipation of steps from China

Crude prices ended substantially lower on Friday, 12 November 2010 at Nymex. Prices fell despite the dollar index slipping. Prices fell on reports that China is preparing for an interest-rate increase to counter rising inflation.



On Friday, crude oil futures for light sweet crude for December delivery closed lower by $2.93 (3.3%) at $84.88/barrel. For the week, crude lost 2.3%.

For the month of October, crude ended higher by 1.8%. In September, crude prices ended higher by 11.2%. For the third quarter, crude ended higher by 5.7%. Crude had 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 8%.

China reported last Thursday that its inflation rose 4.4%, its highest in two years.

In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, ended lower by 0.3%.

During the week, EIA reported a decline of 3.3 million barrels in the nation's crude-oil supplies in the week ended 5 November. Market was expecting a buildup in crude inventories. Gasoline stockpiles fell 1.9 million barrels and distillates dropped by 5 million barrels.

On Friday, the International Energy Agency revised higher its global demand forecast for oil products this year, by 200,000 barrels a day to 2.3 million barrels a day, or 2.8% growth on-year. As per the report, global oil demand is now expected to average 87.3 million barrels a day in 2010. For 2011, the IEA kept its growth forecast broadly unchanged at 1.2 million barrels a day, or 1.4% growth year on year, with demand seen averaging 88.5 million barrels a day.

Earlier during the week, on Tuesday, Energy Information Administration increased its expectations for U.S. fuel consumption this year. The agency released its monthly outlook on Tuesday, also increasing its expectations for domestic oil production. As per the agency, global oil demand will be 2 million barrels per day. The EIA revised upward its estimate of global oil demand due to “stronger-than-expected growth in European oil demand as well as continued strong growth in China.

Among other energy products on Friday, December gasoline closed down 3 cents, or 1.1%, to settle at $2.21 a gallon. Gasoline rose 1.4% this week, its third consecutive weekly gain. Heating oil for December delivery declined 6 cents, or 2.6%, to $2.36 a gallon. On the week, the product declined 0.8%.

Also on Friday, natural gas retreated 13 cents, or 3.2%, to $3.80 per million British thermal units. Natural gas declined 3.6% on the week.

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.