Crude has a flat finish

Prices rise marginally higher as agencies increase demand forecast for oil

Crude prices ended marginally higher on Thursday, 10 February 2011 at Nymex. Prices rose earlier in the day but gave up gains. Prices dropped as the dollar turned strong today. Prices also were hammered following unconfirmed news that Egypt President Hosni Mubarak will step down.



On Thursday, crude oil futures for light sweet crude for March delivery closed higher by $0.02 (0.01%) at $86.73/barrel. Earlier it rose to $87.9 but failed to hold on that level. Last week, crude lost 0.4%. Crude prices gained 0.9% in January. Prices have dropped 7% till date this year.

For the year of 2010, crude closed higher by 15%.

Earlier in the day, the Organization of the Petroleum Exporting Countries and the International Energy Agency both forecast increased demand for crude oil this year. As per IEA, daily demand for oil will grow by 1.5 million barrels a day to 89.3 million barrels a day in 2011. In 2010, global oil demand rose by 2.8 million barrels a day year on year to 87.8 million barrels a day. World oil supply rose by 500,000 barrels a day in January, to 88.5 million barrels a day, on higher output from OPEC.

OPEC also saw rising worldwide demand for oil. It projected that world oil demand grew by 1.8 million barrels a day to 86.3 million barrels a day in 2010 and forecast a rise of 1.4 million barrels a day in 2011, averaging 87.7 million barrels a day.

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, strengthened substantially for the first time in a week and rose by 0.6%.

The Labor Department in US reported on Thursday, 10 February 2011 that new applications for regular state unemployment-insurance benefits moved below the closely watched level of 400,000 claims. Initial claims for these benefits fell 36,000 to a seasonally adjusted 383,000 in the week ended 5 February, hitting the lowest seen since July 2008. The four-week average of new claims, which some market look to because it smoothes out some volatility, fell 16,000 to a total of 415,500.

Continuing claims, which reflect the number of people already receiving unemployment compensation, also declined, down 47,000 to 3.89 million in the week ended 29 January. The four-week average of these continuing claims remained at 3.93 million.

Last weekend, Egypt's regime met for the first time with representatives of the banned Muslim Brotherhood. President Hosni Mubarak has hung onto power despite the protests that have called for his resignation.

Roughly ten days back, tensions in Egypt fueled concerns among traders that the same might spill over to neighboring countries thus hampering production in oil producing Middle East and African countries. Egypt is not a major Mideast oil producer, as its oil output has steadily declined since the mid-1990s. But the country is a key oil-transit route with the important Suez-Mediterranean, or Sumed, pipeline and the Suez Canal.

In the weekly inventory report, the EIA reported yesterday, a rise of 1.9 million barrels to the nation's crude supply for the week ended 4 February. Market had expected an increase of 2.4 million barrels. The agency also reported that gasoline supplies rose 4.7 million barrels for the week, which contrasted with expectations for an increase of 3.1 million barrels. Inventories of distillates, which include heating oil and diesel, rose 300,000 barrels against market seen them falling 1.4 million barrels.

In the latest monthly outlook, the EIA said earlier during the week that world crude oil and liquid fuels consumption grew by an estimated 2.4 million barrels a day last year to 86.7 million barrels a day in 2010, the second largest annual increase in at least 30 years. That also compares with the EIA's January estimates that world crude consumption grew 2.2 million barrels a day. The agency expects world liquid fuels consumption to grow by 1.5 million barrels a day in 2011, slightly over January expectations, and by an additional 1.6 million barrels a day in 2012, the same as in its January report.

Among other energy products on Thursday, gasoline for March delivery retreated 6 cents, or 2.2%, to $2.47 a gallon.

Natural gas for March delivery declined 6 cents, or 1.4%, to $3.99 per million Btus, its lowest settlement since mid-November. The Energy Information Administration reported a larger-than-expected drop in natural gas in storage for the week ended 4 February. The EIA reported a decline of 209 billion cubic feet.

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 February closed higher by Rs 6 (0.15%) at Rs 3,973/barrel. Natural gas for February delivery closed lower by Rs 0.7 (0.4%) at Rs 183.8.