Crude continues to slip lower

Crude sheds almost 17% in August itself

Crude prices ended substantially lower on Tuesday, 09 August 2011 at Nymex. Prices plunged as recent economic conditions continued to question the demand and outlook for crude in the coming months to come. News that Standard & Poor's downgraded US debt last weekend kept stocks volatile even on Tuesday. Prices also slipped along with equities before Fed came out with its latest comments regarding the FOMC meet.

On Tuesday, crude oil futures for light sweet crude for August delivery closed lower by $2.01 (2.4%) at $79.31/barrel. It fell to a low of $75.71 and also rose to a high of $83.05 during intra day trading. Last week, crude shed 9.2%. So far this month, oil has lost 17%. For the year, it has declined 13%.



After staying volatile earlier during the day, US stocks rallied during the final hour of trading after latest FOMC comments from Fed. The Fed announced it would keep interest rates, now near 0%, at ultralow levels at least through mid-2013, the first time it put a time frame on its low-rate stance. The monetary committee also lowered its outlook for the pace of recovery, and discussed a range of policy tools to stimulate growth.

The U.S. Energy Department‘s Energy Information Administration kept its expectations for global oil demand for 2011 and 2012. In its monthly short-term report, the EIA said world consumption will grow by 1.4 million barrels a day in 2011 and by 1.6 million barrels a day in 2012, despite “continued concerns over the pace of the global economic recovery,” the same expectations on its July report.

The United States late Friday lost its triple-A debt rating from Standard & Poor's for the first time in history, with the credit-rating agency saying the political system of the world's top economy has become less stable and that budget cutting announced earlier this week didn't go far enough.

S&P lowered its rating on the U.S. by a notch to AA+ and, to compound the embarrassment, said the outlook is negative as well, as it threatened another reduction in two years. The rating agency said the deal reached by lawmakers to cut the federal deficit by an estimated $2.1 trillion over a decade didn't go far enough, and America's governance and policymaking is becoming less stable, less effective, and less predictable than what was previously believed.

Among other energy products on Tuesday, September gasoline retreated 2 cents, or 0.9%, to $2.67 a gallon, the lowest settlement since late February. Gasoline is down 14% so far this month, but up 9% this year. September heating oil lost 4 cents, or 1.3%, to $2.76 a gallon. That was the lowest finish for heating oil since late June.

September natural gas was the exception, having added 6 cents, or 1.5%, to settle at $3.99 per million British thermal units.

At the MCX, crude oil for August delivery closed lower by Rs 116 (3.1%) at Rs 3,663/barrel. Natural gas for August delivery closed at Rs 182, higher by Rs 3.2 (1.8%).