Volatile crude ends marginally lower

Crude ends lower for first time in six days

Crude prices ended its five day winning streak and ended marginally lower on Wednesday, 12 October at Nymex. Prices fluctuated between small gains and small losses throughout the day and dropped at the end despite a weak dollar. Prices closed lower as latest minutes from Federal Reserve failed to provide any new clue regarding economic recovery.



Light and sweet crude for November delivery fell $0.24 (0.3%) to $85.57 a barrel on the New York Mercantile Exchange on Wednesday. Last week, crude gained 4.8%. For the month of September, oil futures lost 11%, and for the quarter, crude incurred losses of 17%. It was the worst quarterly performance for crude in almost two years.

Federal Reserve officials who voted last month to twist their holdings of bonds were concerned the economy might not pick up by the end of the year. In the latest FOMC details released, Fed officials “saw considerable uncertainty surrounding the outlook for a gradual pickup in economic growth,” with the economy showing only a weak bounce after the recession in contrast to past recoveries.

In its latest monthly outlook report, the EIA reduced slightly the pace of world oil demand growth in 2011. As per the report, world oil demand this year will rise by 1.5% to 88.4 million barrels a day, followed by a 1.6% rise to 89.84 million barrels a day in 2012. Global oil supply is expected to rise 1% this year, to 87.84 million barrels a day, and gain a further 1.8% in 2012, to 89.41 million barrels a day.

US stocks pared early weakness and were trading higher today. Its strength came largely in response to improved confidence in Europe, where officials have recently made a stronger commitment to shore up the region's financial system and even recapitalize its banks. That has helped reduce the perception of risk related to the European portfolios owned by diversified banks and financial services firms. In addition, Slovakia's political parties reached an agreement that will allow the nation's parliament to approve enhancements to the Europe's bailout fund.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, ended lower by 0.55%.

A day earlier, the Organization of the Petroleum Exporting Countries trimmed its 2011-2012 growth forecast for global oil demand. In a monthly report, OPEC cut the global demand growth forecast for this year by 180,000 barrels of oil a day. The cartel also warned it could cut the outlook again.

Among other energy products on Wednesday, November gasoline advanced less than 1 cent to settle at $2.75 a gallon, while November heating oil rose 3 cents, or 1.1%, to finish at $2.93 a gallon. Both heating oil and gasoline futures have settled higher for three sessions in a row.

Natural-gas futures were the exception, with the November contract lost 13 cents, or 3.5%, to end the day at $3.49 per million British thermal units.

At the MCX, crude oil for October delivery closed lower by Rs 34 (0.8%) at Rs 4,206/barrel. Natural gas for October delivery closed at Rs 172.8, lower by Rs 5.1 (2.9%).