Crude prices continues to slip

Prices fell despite a flat dollar and better than expected economic reports

Crude prices ended modestly lower on Thursday, 15 December 2011 at Nymex. Prices fell despite a flat dollar and better than expected economic reports. Prices continued with their prior session's decline when crude prices had slumped more than $5 at one single session.

Light and sweet crude for January delivery fell $1.08 (1.1%) to $93.87 a barrel on the New York Mercantile Exchange on Thursday. Last week, crude lost 1.5%. For the month of November, oil futures gained 7.7%.



In the currency market on Thursday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies stayed flat for most part of the day and ended lower by about 0.3%. The dollar rose to 11 month high mainly against the euro a day earlier.

There were no major, fresh developments on the European Union debt crisis scene on Thursday. A Spanish bond auction was well received on Thursday, and that was a bit of a calming effect on the market place. The Euro currency has fallen to a fresh 11-month low this week amid the EU debt crisis.

US stocks rose on Thursday after the major initial claims data for the week showed a seasonally adjusted 366,000 workers filed initial jobless claims in the week ended 10 December 2011, well below forecasts and the lowest since May 2008. The figures were the latest indication that the weak jobs market is slowly building strength. The four-week moving average of new jobless claims fell to the lowest level since July 2008.

A slew of other U.S. economic data greeted investors. U.S. wholesale prices rose slightly in November due to higher food costs, but the underlying rate of increase in producer prices remained tame, indicating little inflation pressure, while the U.S. current account deficit narrowed in the third quarter.

U.S. industrial production fell for the first time in seven months during November, an unexpected drop caused by declining output of cars, electronics, clothing, and other products.

In the latest weekly inventory report, the EIA announced yesterday a decline of 1.9 million barrels in U.S. crude supplies for the week ended 9 December 2011. Motor gasoline supplies rose 3.8 million barrels, while distillate stocks fell 500,000 barrels in the latest week. Market had expected a decrease of 2 million barrels for crude supplies, a rise of 2 million for gasoline and an increase of 500,000 barrels for distillates.

At a meeting in Vienna on Wednesday, the Organization of the Petroleum Exporting Countries said members will maintain their current, total production of 30 million barrels per day, including production from Libya, which has been ramping up to pre-civil-war levels.

Earlier during the week, in its latest monthly oil report, trimmed its forecast for global oil demand for 2011 and 2012 by 160,000 barrels a day and 200,000 barrels a day, respectively, citing a “more precarious economic backdrop.” The agency now expects global oil demand to average 89.0 million barrels a day in 2011 and 90.3 million barrels a day in 2012. The IEA also forecast Iranian production capacity to decline by 890,000 barrels a day to just under 3 million barrels a day by 2016, due to tighter sanctions.

Among other energy products on Thursday, gasoline for delivery in the same month declined 2 cents, or 0.6%, to $2.49 a gallon. The January heating oil declined 1 cent, or 0.3%, to $2.82 a gallon.

January natural-gas futures lost 1 cent, or 0.3%, to $3.13 per million British thermal units. Natural gas had held to gains after the Energy Information Administration reported Thursday a decrease of 102 billion cubic feet in the week ended 9 December.

At the MCX, crude oil for December delivery closed lower by Rs 173 (3.3%) at Rs 5,036/barrel. Natural gas for December delivery closed at Rs 168.9, lower by Rs 3 (1.9%).