Crude rises for first time in five sessions

Prices rise on Iran’s threats and as storm Dolly comes near the Gulf

Crude oil prices rose for the first time in five sessions today, Monday, 21 July, 2008. Price spurred up as a tropical storm, Dolly, entered the Gulf of Mexico, and Iran, the world's fourth-biggest producer, resisted demands to suspend nuclear research. Last week crude had coughed up almost $16.5 in four sessions. Prices had plunged once again on economic worries surrounding the US economy.

Crude-oil futures for light sweet crude for August delivery closed at $131.04 /barrel (higher by $2.16/barrel or 1.7%) on the New York Mercantile Exchange. It was the first increase in five days. Last week, prices coughed up $16.5 (11.2%). It's now 11% lower than the $147.27 record high hit last Thursday.

Crude prices gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. Prices are 74% higher than a year ago. For the year, crude is up by 38.7% till date.

A hurricane watch was issued for the Texas coastline from Brownsville to Port O'Connor at morning time today by the Miami-based hurricane center. Dolly moved over the Yucatan Peninsula earlier today. Petroleos Mexicanos, Mexico's state oil company, produces about 1.07 million barrels of oil a day in the Bay of Campeche, which is south of the projected track of the storm. The northern Gulf of Mexico accounts for about 25% of U.S. oil production.

On the other hand, Iran snubbed Western efforts to get it to suspend nuclear enrichment at talks in Geneva on 19 July setting the stage for new sanctions if the Middle East's second-largest oil producer doesn't respond to an existing proposal within two weeks.

At the currency markets on Monday, the U.S. dollar slipped after getting some support earlier on better-than-expected results from Bank of America. The banking giant reported a 41% profit fall for the second quarter but still beat Wall Street earnings estimates. The dollar index, a measure of the greenback against a trade-weighted basket of currencies, was down 0.1% at 72.069.

In its monthly report issued last week, OPEC lowered its forecast for world oil-demand growth for 2008 to 1.03 million barrels a day, which represents a decline of 70,000 barrels from its previous estimate. Global oil demand this year is expected to average 86.81 million barrels a day. Earlier this month, the Energy Information Administration projected that U.S. petroleum consumption will shrink by 400,000 barrels a day in 2008, 38% more than EIA's June projection of a decline of 290,000 barrels.

Natural gas in New York declined amid an outlook supplies are ample at the height of the U.S. cooling season and the path of a storm in the Gulf of Mexico will miss production areas. Natural gas for August delivery fell 6 cents (0.6%) to settle at $10.51 per million British thermal units.

At the MCX, crude oil for July delivery closed at Rs 5,599/barrel, higher by Rs 67 (1.21%) against previous day’s close. Natural gas for July delivery closed at Rs 453.3/mmbtu, lower by Rs 3.6/mmbtu (0.8%).