Crude takes a big leap

Economic data and Mid-East tensions push up prices

Crude prices ended substantially higher on Thursday, 17 February 2011 at Nymex. Prices rose due to a host of factors. Lower dollar, continuing violence at Middle East and economic data pushed crude prices higher for the day.



On Thursday, crude oil futures for light sweet crude for March delivery closed higher by $1.37 (1.6%) at $86.36/barrel. Last week, crude lost 3.9%. Crude prices gained 0.9% in January. Prices have dropped 8% till date this year.

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

In the currency market on Thursday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, dropped by 0.22%.

Economic data on Thursday showed that the prices that American consumers pay for goods and services rose a seasonally adjusted 0.4% in January, mainly because of higher gas and grocery expenses. But “core” consumer prices rose a lesser 0.2%. The core data strips out volatile food and energy costs that can make overall inflationary pressure in the economy to seem higher or lower than it actually is. Market had forecast the consumer price index to rise 0.3% overall, with a 0.1% increase in the core rate.

The Labor Department in US reported on Thursday, 17 February 2011 that new applications for jobless benefits rose by 25,000 to 410,000 last week, reflecting choppy conditions in a still-tepid U.S. labor market. The four-week average of new claims rose a scant 1,750 to 417,750. The moving average is considered a more accurate barometer of employment trends because it smooths out fluctuations in the data caused by special factors such as holidays or bad weather.

Market had expected initial claims in the week ended 12 February to rise to a seasonally adjusted 400,000.

Additionally, The Philadelphia Fed Survey for February surged to a seven-year high of 35.9. Market had generally expected a reading of only 21.0 after it came in at 19.3 in the prior month. Leading Indicators for January increased by just 0.1%, which is shy of the 0.3% increase that had been widely anticipated. Indicators for December were downwardly revised to reflect a 0.8% increase.

In the latest weekly inventory report on crude and crude products, the EIA reported yesterday that crude inventories rose 900,000 barrels for the week ended 11 February. Market had expected a rise of 2.8 million barrels. The report also stated that gasoline inventories increased by 200,000 million barrels against an expected increase of 1.7 million. Supplies of distillates, which include diesel and heating oil, decreased by 3.1 million barrels against an expected decline of 1.1 million barrels.

Among other energy products on Thursday, gasoline for March delivery retreated 2 cents, or 0.7% to settle at $2.53 a gallon.

Natural gas for March delivery declined 5 cents, or 1.4%, to settle at $3.87 per million British thermal units. The Energy Information Administration reported that gas in storage dropped by 233 billion cubic feet in the week ended 11 February. Market had expected a decline of 235 billion to 239 billion cubic feet. The drawdown was larger than the 190 billion cubic feet seen in the same week of 2010 and above the five-year average decrease of 150 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 23 (0.6%) at Rs 3,895/barrel. Natural gas for February delivery closed lower by Rs 4.8 (2.7%) at Rs 175.7.