Crude settles at three month high

Prices rise following positive economic data and weak dollar

Crude prices ended substantially higher on Thursday, 03 November at Nymex. Prices settled at highest level in three months after making a slow start earlier during the day. Traders focused on the positive economic data. The low dollar also helped prices climb up. Uncertainties in the euro zone put a curb on the price rise during the day.

Light and sweet crude for November delivery rose $1.56 (1.7%) to $94.07 a barrel on the New York Mercantile Exchange on Thursday. It was crude's highest settlement since early August. Last week, crude gained 6.7%. For the month of October, oil futures gained 18%. During the third quarter ending in September, crude incurred losses of 17%. It was the worst quarterly performance for crude in almost two years.



Thursday began with solid gains at Wall Street after the ECB surprised markets with a quarter-point cut to its key lending rate to 1.25% amid deteriorating economic data from the euro region. In a press conference, new ECB President Mario Draghi suggested the euro area could relapse into a mild recession by the end of the year.

The political troubles of Greece's Prime Minister George Papandreou mounted on Thursday after Greece's finance minister publicly opposed a plan to tie a referendum to the nation's membership in the euro zone. Its downturn was mostly owed to a bounce by the euro as participants come to believe that Greece will abandon its eurozone bailout referendum and acquiesce to the agenda of other eurozone members.

U.S. data showed new applications for jobless benefits dropped back below the 400,000 level. It fell by 9,000 to 397,000. Also, the Institute for Supply Management said its gauge of services-sector activity slid to 52.9% in October from 53% in September, showing the sector was still expanding but disappointing economists' projections. Meanwhile, factory orders for September increased by 0.3%, which is a positive surprise since many had expected a 0.2% decline.

In the currency market on Thursday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies climbed up initially but then pared gains and fell by almost 0.4% going into close.

A day earlier, on Wednesday, the Fed cut its growth outlook for US economy sharply for this year, 2012 and 2013. Ben Bernanke also said the Fed is prepared to engage in further accommodation. The Fed's board members and presidents now see 2011 gross domestic product between 1.6% and 1.7%, 2012 GDP between 2.5% and 2.9%, 2013 GDP between 3% and 3.5% and 2014 GDP between 3% and 3.9%.

In the weekly inventory report, the Energy Information Administration reported yesterday an increase of 1.8 million barrels in crude supplies in the week ended 28 October 2011. Market had expected to see a rise of 1.1 million barrels. The EIA also reported a rise of 1.4 million barrels for gasoline supplies, and a decrease of 3.6 million barrels for stockpiles of distillates. Market had expected a decline in gasoline inventories by 1.5 million barrels, and a decrease of 2.2 million barrels for distillates.

Among other energy products on Thursday, December gasoline added a penny to settle at $2.64 a gallon. December heating oil rose 4 cents to end at $3.04 per gallon.

Natural gas futures ended higher despite a bearish inventories report out Thursday. Natural gas for December delivery added 3 cents, or 0.8%, to $3.78 per million British thermal units.

At the MCX, crude oil for November delivery closed higher by Rs 68 (1.5%) at Rs 4,609/barrel. Natural gas for November delivery closed at Rs 186.6, lower by Rs 0.5 (0.3%).