Crude slips on global demand concerns

Strong dollar, weekly inventory report and economic data push prices lower

Crude prices ended substantially lower on Wednesday, 23 November at Nymex. Weaker than expected economic data from China and Wall Street coupled with lingering Euro zone's debt problems pushed prices lower today. A strong dollar and weekly inventory report also impacted prices.

Light and sweet crude for January delivery fell $1.84 (1.9%) to $96.17 a barrel on the New York Mercantile Exchange on Wednesday. Losses had picked up as U.S. stocks opened broadly lower, but moderated somewhat after the latest weekly inventory report from the EIA. Last week, crude lost 1.6%. 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.



In the latest weekly inventory report, The Energy Information Administration said crude inventories fell 6.2 million barrels last week. Market had expected inventories to be unchanged in the week ended 18 November. The EIA also reported gasoline inventories rose 4.5 million barrels, with supplies of distillates, which include heating oil, falling 800,000 barrels. Market had forecast that gasoline supplies would be up 1.2 million barrels and that distillates would be down 1.5 million barrels on the week.

Some weaker economic news coming out of China Thursday also undermined the raw commodity market sector. A gauge of manufacturing activity in China showed a November contraction. The HSBC preliminary purchasing managers index declined to 48, down from 51 in October.

The market place got another negative jolt on Wednesday when a German government bond auction turned in disastrous results. This rattled already shaky world stock markets and once again called into question the survivability of the Euro currency. The European Union debt crisis has now spread from the smaller, periphery countries to the major core countries of the EU.

In the currency market on Wednesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies ended higher by 1.1%.

Wall Street offered little reaction to domestic data, which showed consumer spending rising less than projected as well as orders for durable goods falling in October.

Other reports had more first-time applicants than estimated filing for jobless benefits last week, although the overall count remained under 400,000 for a third week, while U.S. consumer confidence for November ticked up to its highest level since June, albeit at a relatively low level.

Among other energy products on Wednesday, December gasoline lost 4 cents, or 1.7%, to end at $2.52 a gallon. December heating oil declined 8 cents, or 2.5%, to $2.96 a gallon.

The EIA also reported on natural gas inventories, a day earlier because of the Thanksgiving holiday on Thursday. The agency said supplies rose 9 billion cubic feet. Market had expected inventories to rise 18 billion cubic feet for the week. December natural gas turned higher on the news. It ended 4 cents higher, or 1.3%, at $3.46 per million British thermal units.

At the MCX, crude oil for November delivery closed lower by Rs 68 (1.3%) at Rs 5,074/barrel. Natural gas for November delivery closed at Rs 180.3, higher by Rs 2.1 (1.2%).