Crude ends losing streak

Prices rise as report shows unexpected drop in crude inventories

Crude oil prices ended its losing streak and ended higher on Wednesday, 14 April 2010. Prices went up as energy department reported unexpected drop in crude inventories for last week. Market had anticipated that the weekly inventory report would show substantial rise in crude inventories. The lower dollar also aided in rising crude price.

On Wednesday, crude-oil futures for light sweet crude for May delivery closed at $86.73/barrel (higher by $1.62 or 1.9%). Prices had dropped in last five sessions. Last week, crude ended higher by just 0.6%. For the month of March, crude rose 5.1%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 7.7%.

Prices are still very much lower as compared to 3 July, 2008 settlement of $145.29 a barrel and an intraday high of $147.27 on 11 July, 2008, an all-time high. However, oil has also gained nearly 155% from a December 2008 nadir. That day prices settled at $33.87 a barrel following an intraday low of $32.40.

The EIA reported today an unexpected decrease in crude stockpiles for week ended 9 April. The EIA data showed supplies decreased by 2.2 million barrels in the week. The EIA's latest weekly data also showed total motor gasoline inventories decreased by 1.1 million barrels, while distillates, which include heating oil and diesel, increased by 1.1 million barrels.

Market was expecting weekly inventory report to show that crude stockpiles will increase by 1.6 million barrels, while gasoline stocks will be down by 1.26 million barrels for last week. Distillates stocks, which include heating oil and diesel, were expected to be up by 1 million barrels.

In the latest monthly report, the Organization of the Petroleum Exporting Countries on Wednesday left unchanged its forecast for global oil demand in 2010. Consumption is projected to increase by 900,000 barrels a day this year, the oil cartel said in its monthly report.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against basket of six other currencies fell by 0.4%. The dollar index gained about 0.7% in March and rallied 4% during the first quarter. The dollar index has gained 4.1% this year till date. The U.S. currency gave ground, as investors were eager to embrace risk again, helped by upbeat earnings reports from Intel and J.P. Morgan Chase that boosted sentiment on Wall Street.

Among economic reports for the day, the Commerce Department in US reported on Wednesday, 14 April 2010 that U.S. retail sales rose a better-than-expected 1.6% in March, spurred by fresh demand for autos, building materials and new spring clothes. Sales totaled $363.2 billion - the fifth gain in six months. Excluding autos and trucks, sales climbed 0.6% to $300.5 billion.

Also, the Labor Department in US reported on Wednesday, 14 April 2010 that U.S. consumer prices rose 0.1% on a seasonally adjusted basis due mainly to increased costs for fresh fruits and vegetables. The government's core consumer price index, measuring the rate of retail-level inflation after excluding food and energy, was unchanged in March.

Elsewhere, natural gas for May delivery rose 3.9 cents, or 0.9%, to settle at $4.199 per million British thermal units on the New York Mercantile Exchange. Prices have risen 14% from a year ago.

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. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.

At the MCX, crude oil for April delivery closed higher by Rs 71 (1.9%) at Rs 3,809/barrel. Natural gas for April delivery closed at Rs 187.7/mmbtu, higher by Rs 4.1 (2.23%).