Crude prices rise on supply concerns

Natural gas prices register huge drop

Crude oil prices shot up on Thursday, 09 June 2011 at Nymex. Prices rose as OPEC members decided to keep their production quota unchanged at their latest meeting at Vienna a day before on Wednesday. Prices also dropped following the weekly inventory report which showed a decline of crude inventories for last week.



On Thursday, crude oil futures for light sweet crude for July delivery closed higher by $1.19 (1.2%) at $101.93/barrel. It rose to a high of $102.44 during intra day trading. Last week, crude lost 0.4%. Crude lost 9.9% for the month of May.

For the year till date, crude prices have gained 14.1%. For the first quarter of this year, crude gained 17%.

Representatives of OPEC member countries meeting in Vienna on Wednesday couldn't reach an agreement on whether to reduce or raise the cartel's official production quotas, and kept current levels for now.

In the currency market on Thursday, the dollar was up today, but off of its session high. After trading with moderate weakness this morning, it was up against the yen, sterling pound, and the euro. The greenback began to garner support as European Central Bank President Trichet stated the need to remain vigilant in an environment of upward inflation pressure and economic uncertainty. The ECB opted to keep its target interest rate unchanged at 1.25%.

Economic data showed today that the U.S. trade deficit narrowed sharply in April as imports from Japan were curtailed due to the earthquake. As per the Commerce Department, the nation's trade deficit narrowed 6.7% in April to $43.7 billion from a revised $46.8 billion in March.

Separately, the government reported a slight rise in those applying for unemployment benefits, with new claims up 1,000 to 427,000 last week.

In the latest weekly inventory report, the U.S. Department of Energy's Energy Information Administration reported on Wednesday a decline in crude-oil inventories of 4.8 million barrels in the week ended 3 June 2011. Market had expected a decline, but of around 1.5 million barrels. The EIA also reported gasoline stockpiles rose by 2.2 million barrels, and inventories of distillates increased by 800,000 barrels on the week. Market had expected increases of 1.1 million barrels for gasoline stockpiles and 400,000 barrels for distillates.

Earlier during the week, U.S. Department of Energy's Energy Information Association released its short-term outlook today calling for more demand this year. The EIA said demand will grow by 1.7 million barrels per day in 2011, about 300,000 barrels a day higher than the agency's last-month forecast. The estimate is due to higher expectations “of consumption for electricity generation in China, Japan and the Middle East”.

The EIA also estimated supplies from non-OPEC countries to increase by an average of about 590,000 barrels a day in 2011, and supplies from OPEC members to decline by 370,000 barrels a day. The agency projected world consumption will increase by 1.6 million barrels a day in 2012, unchanged from last month's outlook.

Among other energy products on Thursday, July gasoline advanced 6 cents, or 2.1%, to end at $3.04 a gallon. July heating oil tacked on 4 cents, or 1.4%, to close at $3.14 a gallon.

July natural gas declined 17 cents, or 3.6%, to finish at $4.674 per million British thermal units.

At the MCX, crude oil for June delivery closed higher by Rs 26 (0.6%) at Rs 4,548/barrel. Natural gas for June delivery closed at Rs 209.3, lower by Rs 7.8 (3.6%).