Crude prices end substantially higher

IEA expects global oil demand to average 89.0 million barrels a day in 2011 and 90.3 million barrels a day in 2012

Crude prices ended considerably higher on Wednesday, 13 December 2011 at Nymex. Prices stayed strong throughout the day. Prices rose following reports of Iran planning military drills in a strategically important oil-shipping channel. A strong dollar put a check on the price rise.



Light and sweet crude for January delivery rose $2.37 (2.4%) to $100.14 a barrel on the New York Mercantile Exchange on Tuesday. Prices rose to a high of $101.25 during intra day trading. Last week, crude lost 1.5%. For the month of November, oil futures gained 7.7%.

In the currency market on Tuesday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by about 0.8%.

US stock market was sporting an impressive gain in the early going, but the confluence of technical resistance, another retreat by the euro, and disappointment over the Fed's failure to give additional consideration to further quantitative easing forced stocks lower. In the latest FOMC meet, the Fed recognized that strains in global financial markets continue to pose significant downside risks to the economic outlook. To little surprise, the Fed kept target interest rate in the range of 0.00% to 0.25% and remained committed to extending the average maturity of its holdings.

The Commerce Department in US reported that the nation's retail sales climbed just 0.2% in November. Both total sales and sales less autos increased by 0.2%, but total sales had been generally expected to increase by 0.6%, while sales less autos had been generally expected to post a 0.5% increase. Other reports on Tuesday on the U.S. economy had the Commerce Department reporting that inventories at U.S. businesses rose 0.8% in October, with business sales up 0.7%.

In its latest monthly oil report, the International Energy Agency 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 Tuesday, January gasoline gained 6 cents, or 2.4%, at $2.62 a gallon, while heating oil for the same month rose 3 cents, or 1.1%, to finish at $2.93 a gallon.

The January natural gas contract rose 2 cents, or 0.8%, to end at $3.28 per million British thermal units.

At the MCX, crude oil for December delivery closed higher by Rs 139 (2.7%) at Rs 5,342/barrel. Natural gas for December delivery closed at Rs 175.6, higher by Rs 1.4 (0.8%).