Crude plunges below $83

Prices register steepest fall in three months

Crude oil ended substantially lower at Nymex on Tuesday, 04 May 2010. Prices fell in tandem with US equities. U.S. stocks fell sharply on Tuesday as concerns over Greece's bailout package and Europe's national debts weighed on sentiment and as dollar once again climbed up against the euro.

On Tuesday, crude-oil futures for light sweet crude for June delivery closed at $82.74/barrel (lower by $3.35 or 4%). It was biggest drop for crude in three months – both in dollar and percentage terms. Oil for July delivery fell $3.39 cents, or 3.9%, to $85.76 a barrel. Last week, crude ended higher by 1.2%. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 4.4%.

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.

A bailout package worth some $146 billion for Greece was announced over the weekend, but it was not enough to restore investors' confidence about the euro-zone countries and the euro and investors again sought gold as a hedge against currency fears.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against basket of six other currencies rose by 1.2%. The dollar is up some 6.7% for the year.

All eyes are now set on tomorrow's weekly inventory report by the energy department.

Natural gas futures rose for a second day in New York on Tuesday. Natural gas for June delivery rose 1.3 cents, or 0.3%, to settle at $4.013 per million British thermal units on the New York Mercantile Exchange.

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 May delivery closed lower by Rs 124 (3.2%) at Rs 3,736/barrel. Natural gas for May delivery closed at Rs 180.9, higher by Rs 2 (1.1%).