Crude rises as crude inventory drops more than expected

Crude prices managed to pare initial weakness and end higher on Wednesday, 05 January 2011 at Nymex. Prices rose as energy department reported a drop in crude and crude stockpiles for last week. Strong economic data also pulled up prices.



On Wednesday, crude oil futures for light sweet crude for January delivery closed higher by $0.92 (1%) at $90.3/barrel.

Crude ended December higher by 8.6%. Crude ended the fourth quarter of FY 2010 higher by 13%. 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, crude rose by 5.5%. For the year of 2010, crude closed higher by 15%.

In the latest weekly inventory report, the EIA reported today a decline of 4.2 million barrels in the nation's crude-oil inventories for the week ended 31 December. Market had expected inventories to drop, but by just 2.2 million barrels. Gasoline inventories rose by 3.3 million barrels on the week, contrasting with expectations for a 600,000-barrel increase. Stocks of distillates, which include heating oil and diesel, rose 1.1 million barrels. Market had estimated an increase of 500,000 barrels.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies rose by 1%.

The Institute for Supply Management reported on Wednesday, 05 January 2011 that its non-manufacturing index rose to 57.1% from 55.0% in November, marking the 12th month in a row the gauge has been above the 50%.

It was the strongest reading since May 2006, and the reading shows that the services sector overtook manufacturing in December, the first time in 18 months, as retailers enjoyed a strong Christmas selling season. Real estate, rental and leasing, and information were also among the 14 industries showing growth. The business activity subcomponent jumped 6.5 points to 63.5%, and the new orders subcomponent rose 5.3% to 63%.

Among other energy products, gasoline for February delivery gained 3 cents, or 1.3%, to settle at $2.45 a gallon. February heating oil added 4 cents, or 1.4%, to $2.54 a gallon.

Natural gas held on to its losses, however, with the February contract down 20 cents, or 4.2%, to $4.52 per million British thermal units.

Before FY 2010, crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for January closed lower by Rs 95 (2.3%) at Rs 4,041/barrel. Natural gas for January delivery closed at Rs 210.6, higher by Rs 2.3 (1.1%).