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Monday, August 22, 2011

Crude continues with its downward slide


Prices shed almost 4% on a weekly basis

Crude prices ended little lower on Friday, 19 August 2011 at Nymex. Prices continued to drop as global recession fears resumed. The day at Wall Street did not feature any economic data. Worse than expected economic data in most cases a day earlier exacerbated weakness in the market as investors feared that US will once again enter into another recession and the global economic recovery will be doomed. Thus oil prices dropped in tandem with US equities on fears of future demand concerns.



On Friday, crude oil futures for light sweet crude for September delivery closed lower by $0.12 (0.2%) at $82.26/barrel. Prices fell to a low of $79.17 during intra day trading. For the week, crude lost 3.7%.

US stocks witnessed another bout of selling pressure on Friday. After a back-and-forth start to the day, stocks again succumbed to selling pressure in a continuation of the four-week trend that has taken the S&P 500 down 16% during that time. On Friday, the S&P 500 lost another 1.5%. Financials were the worst performing sector.

In the currency market on Friday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by almost 0.2%.

A day earlier, weakness at Wall Street on Thursday was majorly exacerbated by data. Ahead of the open, weekly initial jobless claims increased slightly more than expected to 408,000, overall CPI increased at a sharper than expected clip of 0.5% for July, but core CPI for July increased by an in-line 0.2%.

In the latest weekly inventory report, the EIA reported earlier during the week an increase in crude supplies by 4.2 million barrels for the week ended 12 August 2011. Market had expected a decline of 500,000 barrels. The EIA also reported that gasoline inventories declined by 3.5 million barrels and supplies of distillates, which include diesel and heating oil, rose 2.4 million barrels. Market had expected a decrease of 2.3 million barrels for gasoline supplies and distillates to be up 700,000 barrels.

Among other energy products on Friday, gasoline and heating oil ended higher, with gasoline for September delivery advancing 6 cents, or 2.1%, to $2.84 a gallon. On the week, gasoline lost 0.7%. September heating oil gained 3 cents, or 1%, to $2.90 a gallon. Heating oil was flat for the week.

September natural gas futures advanced 5 cents, or 1.2%, to end at $3.94 per million British thermal units, offsetting some of the recent losses for the product. Natural-gas futures declined 3% on the week.