Volatile crude ends substantially lower

Prices give up earlier gains as China raises its fuel prices questioning demand growth

Crude prices acted in a volatile manner throughout the day today, Thursday, 19 June, 2008. Crude-oil futures closed with a loss of almost $5 a barrel after China raised its fuel prices, sparking concerns about a slowdown in demand. Oil prices climbed earlier on news that a Royal Dutch Shell oil platform off the coast of Nigeria was shut down after an attack by local militants but then slipped again but ended considerably lower for the day.

Crude-oil futures for light sweet crude for July delivery today closed at $131.93/barrel (lower by $4.75/barrel or 3.5%) on the New York Mercantile Exchange. Prices on Nymex climbed as high as $137.35 earlier on the heels of a shutdown of an oil platform in Nigeria. Prices are 91% higher than a year ago. Last week, crude prices closed lower by 2.7%. For the year, crude is up by 35% till date.

It was reported today that China, the second-biggest fuel consumer after the U.S., will increase gasoline and diesel prices by as much as 18%. It was also reported today that Saudi Arabia plans to increase crude-oil production by 200,000 barrels a day.

Yesterday, EIA reported that crude inventories have now fallen 24.8 million barrels in the past five weeks. Crude supplies dropped by 1.2 million barrels to 301 million for the week ended 13 June. Refinery utilization climbed to 89.3% compared with 88.6% of capacity a week earlier.

EIA also reported that demand for motor gasoline was down 1.8% over the past four weeks, compared to the same period a year ago. It stood at an average of about 9.3 million barrels per day. Motor gasoline supplies fell 1.2 million barrels to 208.9 million barrels for the week ended 13 June. Distillate stocks were up 2.6 million barrels at 116.6 million barrels.

Natural gas in New York declined after an Energy Department report showed that U.S. inventories advanced 57 billion cubic feet to 1.943 trillion cubic feet last week. Natural gas for July delivery fell 34.9 cents (2.6%) to settle at $12.861 per million British thermal units in New York.

Against this backdrop, gasoline for July delivery fell 11.41 cents (3.3%) to settle at $3.3526 a gallon in New York. Heating oil for July delivery dropped 14.65 cents (3.8%) to close at $3.7135 a gallon in New York.

Brent crude oil for June settlement today fell $4.44 (3.3%) to $132 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.

At the MCX, crude oil for July delivery closed at Rs 5,735/barrel, lower by Rs 79 (1.3%) against previous day’s close. Natural gas for June delivery closed at Rs 555.1/mmbtu, lower by Rs 11.8/mmbtu (2.1%).