Crude sheds early gains

Prices gain more than 5% in February

Crude prices ended little lower on Monday, 28 February 2011 at Nymex. Prices went up initially due to the low dollar but then pared its gains as traders mulled over the fact that recent surge in crude price was overdone. Prices also dropped on reports that Saudi countries were increasing production to offset the loss from Libya.



On Monday, crude oil futures for light sweet crude for April delivery closed lower by $0.91 (0.9%) at $96.97/barrel. Prices reached a high of $99.96 during intra day trading. Last week, crude gained 14%. That was the largest weekly gain registered by crude in more than a year.

Crude prices gained 5.2% in February 2011 after gaining 0.9% in January. Prices have gained 6% till date this year.

Traders kept a close eye on the clashes in the Mid East region. The revolt in Libya is the latest in a spate of political uprisings across the Mideast and North Africa in recent weeks. Libya's crude exports have come to a virtual halt because of reduced production and a lack of workers at ports, as well as on security concerns. There were reports that the Saudis had already increased their oil production by 8% to make up for Libya's virtual halt.

In the currency market on Monday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, pared initial gains and dropped by 0.3%. The index lost 1% in February 2011 and is down by 2.5% on a y-t-d basis.

Economic data at Wall Street showed today that pending home sales for January fell a softer-than-expected 2.8%. The Chicago PMI for February surpassed expectations by hitting a 20-year high of 71.2. Personal income for January increased by a stronger-than-expected 1.0%, but spending increased a smaller-than-expected 0.2%

Among other energy products on Monday, gasoline for March delivery fell 1 cent, or 0.4%, to $2.926 a gallon. March heating oil fell 10 cents or 3% to $2.73 a gallon.

Natural gas for April delivery, the new front-month contract, added 3 cents (0.8%) to $4.037 per million British thermal units. Last week, the fuel rose 3.2%. Natural gas finished 9.5% lower in February 2011.

At the MCX, crude oil for March closed lower by Rs 18 (0.4%) at Rs 4,444/barrel. Natural gas for March delivery closed higher by Rs 2.3 (1.2%) at Rs 185.7.