Crude witnesses steep fall

Strong dollar, Chinese data and monthly outlook from OPEC impact prices

Crude oil prices plunged on Friday, 10 June 2011 at Nymex. Prices dropped following a strong dollar, data from China and latest monthly outlook on crude from OPEC.

On Friday, crude oil futures for light sweet crude for July delivery closed lower by $2.64 (2.6%) at $99.24/barrel. For the week, crude lost 0.9%. Crude had lost 9.9% for the month of May.



For the year till date, crude prices have gained 11.5%. For the first quarter of this year, crude gained 17%.

In the latest monthly oil market report, OPEC stated that the group's crude production is estimated at 28.97 million barrels a day in May, up 171,000 barrels a day. That would be 1.94 million barrels a day short of the 30.91 million barrels a day OPEC sees in demand for its crude in the third quarter. It estimated the cartel's production at 31 million barrels of oil a day in the third quarter, an increase of 2.1 million barrels a day on-quarter.

The group upgraded the 2011 demand forecast for its crude by about 50,000 barrels a day to 29.92 million barrels a day. In addition, the cartel warned of a supply gap in the second half of the year, although it tempered the gloomy forecast by casting more doubt on global economic growth, a proxy for energy demand.

In the currency market on Friday, the dollar index saw a strong gain finishing up close to 0.9% near 74.80. The euro closed just above its worst levels near 1.4340 after a differing of opinions between European Central Bank President Jean Claude Trichet and German Finance Minister Wolfgang Schauble regarding the new Greece rescue package weighed on the single currency.

The Chinese data showed on Friday that the country's May trade surplus widened to $13.05 billion in May, up from $11.4 billion recorded in April but well below a forecast of $18.6 billion expected. The data showed May exports up 19.4% from a year earlier, the pace marked a sharp easing from a 29.9% rise in April, and was below a forecast of 20.4%.

Representatives of OPEC member countries meeting in Vienna on Wednesday, 08 June, 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 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.

Among other energy products on Friday, July gasoline settled 2 cents lower at $3.02 a gallon. Gasoline advanced 1% on the week. Heating oil for July delivery declined 3 cents, or 1%, to $3.11 a gallon. On the week, the product rose 1.6%.

For natural gas, the July contract rallied 1.8%, adding 8 cents to settle at $4.76 per million British thermal units. On the week, natural gas gained 1.1%.