Crude witnesses considerable drop in price

Crude slips due to strong dollar and weak data

Crude prices ended substantially lower on Thursday, 06 January 2011 at Nymex. Prices fell today after showing days of strength earlier in the week. Strong dollar and worse than expected initial claims data pushed prices lower.



On Thursday, crude oil futures for light sweet crude for January delivery closed lower by $1.92 (2.2%) at $88.38/barrel. During intra day trading, it rose to a high of $90.71 and fell to a low of $87.85.

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 currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies rose by 0.7%.

The Labor Department in US reported on Thursday, 06 January 2011 that the number of U.S. workers who filed new applications for unemployment benefits rose last week by 18,000 to 409,000, but the level of claims is still sharply lower from just six months ago. Market had expected initial claims to rise to a seasonally adjusted 400,000. Last week's jobless claims were revised up by 3,000.

The four-week average of new claims, however, fell 3,500 to 410,750, a two-and-a-half-year low. The moving average is considered a more accurate gauge of employment trends because it evens out fluctuations in the weekly data that can give a distorted picture of the labor market.

In the latest weekly inventory report, the EIA reported yesterday 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.

Among other energy products, February gasoline declined less than 1 cent, or 0.1%, to settle at $2.44 a gallon.

Natural gas for February delivery retreated 4 cents, or 0.9%, to end at $4.43 per million British thermal units. The Energy Information Administration reported a bigger-than-anticipated decline for gas in storage of 135 billion cubic feet for the week ended 31 December. Market had expected a decline of 127 billion to 131 billion cubic feet for the week.

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 4,029/barrel. Natural gas for January delivery closed at Rs 202.3, lower by Rs 2.7 (1.3%).