Crude ends modestly lower

Demand concerns and strong dollar weigh on crude prices

Crude prices ended lower on Monday, 18 July 2011 at Nymex. Concerns about the euro-zone debt crisis and the lack of agreement on raising the U.S. debt ceiling gave rise to demand concerns. A strong dollar further put pressure on crude oil.

On Monday, crude oil futures for light sweet crude for August delivery closed lower by $1.31 (1.4%) at $95.93/barrel. Crude ended June 2011 lower by 7%. Year to date, crude prices are higher by 5.5%.

Crude dropped 11% in the second quarter of this year. For the first quarter of this year, crude had gained 17%.

In Europe, Italian and Spanish government-bond yields rose sharply. Continuing uncertainty over the ability of European officials to agree on a second aid program for Greece and stop the crisis from spreading to other countries such as Spain and Italy spooked investors. They tend to buy gold as a storer of value during times of financial turmoil.

Meanwhile, worries about rising inflation, enhanced by the possibility of the injection of further stimulus into the U.S. economy, have also supported gold, which is seen as a hedge against inflation. The impasse in the U.S. debt-ceiling talks has further added to bullions' appeal.

In the currency market on Monday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by almost 0.4% after rising 1% earlier during the day.

Among other energy products on Monday, August gasoline declined 3 cents, or 1%, to $3.10 a gallon. August heating oil lost 4 cents, or 1.3%, to $3.08 a gallon.

Natural gas futures ended flat. The August contract settled at $4.55 per million British thermal units.

At the MCX, crude oil for July delivery closed lower by Rs 66 (1.5%) at Rs 4,302/barrel. Natural gas for July delivery closed at Rs 202.6, higher by Rs 0.25 (0.4%).