Crude ends lower

Strong economic data fails to boost crude prices

Crude oil prices ended lower on Friday, 29 January 2010. Prices dropped as the dollar headed up based on strong fourth quarter GDP reading by the Commerce Department. The strong consumer sentiment data added further fuel. Prices were also slipping since last couple of days due to impending worries from China front where tightening monetary policies are bothering investors due to shaky demand of metals in coming months.

Strong economic reports generally tend to push crude prices higher. But with a firm dollar, commodity prices were pressured on Friday.

On Friday, crude-oil futures for light sweet crude for March delivery closed at $72.89/barrel (lower by $0.75 or 1%). For the week, crude ended lower by 2.4%. In January 2010, crude ended lower by 8.3%.

In the currency market on Friday, the dollar index, which weighs the strength of dollar against the basket of six other currencies headed up following stronger than expected fourth quarter GDP reading in the US.

The Commerce Department in US reported on Friday, 29 January 2010 that the U.S. economy grew at the fastest pace in six years during the fourth quarter of 2009, even as consumer spending and business investment remained tepid. As per the report, real gross domestic product increased at a 5.7% seasonally adjusted annual rate in the final three months of the year, the best quarterly growth since late 2003. The economy grew 2.2% in the third quarter. A year ago, the economy fell at a 5.4% pace.

The 5.7% increase in the fourth quarter was in line with the 5.4% gain expected by by market. In the fourth quarter of 2009, about two-thirds of the growth came via the swing in inventories. Excluding the change in inventories, final sales increased at a 2.2% annual rate. But, even with healthy growth in the second half of the year, the economy shrank 2.4% in 2009, the worst year for GDP since the 10.9% drop in 1946.

Separately, there was an upbeat report on consumer sentiment. The Reuters/University of Michigan consumer sentiment index rose to a reading of 74.4 in January from 72.5 in December, reaching its highest level since January of 2008.

Earlier during the week, the Energy department reported in its weekly inventory report that crude-oil supplies for the week ended 22 January 2009 fell 3.9 million barrels. Gasoline inventories rose 2 million barrels. Distillate supplies rose 400,000 barrels. Market was expecting crude and gasoline stockpiles to show an increase of 2 million and 1.7 million barrels respectively.

Last week, in the latest report, the Organization of the Petroleum Exporting Countries said that world oil demand is forecast to grow by 800,000 barrels a day this year to average 85.1 million barrels a day, representing no major change from last month's forecast.

Paris based, IEA, left its forecasts for global oil demand for 2010 virtually unchanged in its latest monthly report last week. It forecasts demand of 86.3 million barrels a day in 2010, up 1.7%, or 1.4 million barrels a day higher than 2009.

Among other energy products on Friday, heating oil for March dropped 1.9 cents, to $1.91 a gallon, while gasoline for the same month fell 1.7 cents to $1.91 a gallon.

Also on Friday, March natural-gas futures fell 0.8 cents to $5.13 per million British thermal units.

Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Oil prices had reached a high of $147 on 11 July, 2008 but have dropped almost 53.5% since then. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.