Crude at lowest level in a month

Prices drop by more than $3 as crude supplies fall less than expected

 

Crude oil price dropped to its lowest level in almost a month after Energy Departments reported in the weekly inventory report that crude supplies fell less than expected for the week ended 23 November. Comments from Organization of Petroleum Exporting Countries (OPEC) that the cartel is ready to increase production any time also led prices erode further.

 

For the day ending Wednesday, 28 November, 2007, crude-oil futures for light sweet crude for January delivery closed at $90.6/barrel (lower by $3.8/barrel or 4%) on the New York Mercantile Exchange. Prices reached a high of $99.2 on 21 November. Prices are up 49% from a year ago.

 

Brent crude oil for December settlement fell $2.71 (2.9%) to $89.81 on the London-based ICE Futures Europe exchange.

 

As per the weekly inventory report by The Energy Department, U.S. crude inventories fell by 400,000 barrels to 313.2 million barrels in the week ending 23 November. This was much less than expected figure of 500,000 barrels. Though U.S. crude inventories fell for a second week, stocks are still in the upper half of the average range for this time of year.

 

Also, as per the report, Gasoline supplies rose by 1.4 million barrels to 196.6 million barrels in the latest week, while distillate stocks, which include heating oil and diesel, fell by 100,000 barrels to 130.9 million barrels.

 

The EIA also reported that U.S. crude imports averaged nearly 10.4 million barrels per day last week, up 534,000 barrels per day from the previous week. U.S. refineries operated at 89.4% of their operable capacity last week, up 2.4% from the previous week's 87%.

 

Further rate cut hopes in the mind of traders

 

Natural gas in New York declined on an outlook that above-average supplies are ample for winter. Gas for December delivery fell 35.4 cents (4.7%) to settle at $7.203 per million British thermal units.

 

Against this backdrop, December reformulated gasoline fell 9.73 cents at $2.2757 a gallon and December heating oil lost 7.96 cents at $2.5738 a gallon.

 

In the currency market today, the dollar gained against other major currencies but was off earlier session highs after Federal Reserve Vice Chairman, Donald Kohn, hinted that more interest rate cuts could lie ahead. The dollar index, which measures the performance of the greenback against a basket of six major currencies, rose 0.3% at 75.33.

 

Attacks on oil facilities in Middle East and tight supplies from OPEC have bolstered crude prices this year. As per the U.S. Energy Information Administration, tight global energy supplies are expected to keep energy prices high through 2008.

 

At the MCX, crude oil for December delivery closed lower at Rs 3630/barrel, lower by Rs 128 (3.4%) against previous day's close. Natural gas closed at Rs 302.2/mmtbu as against previous close of Rs 312.3/mmtbu, lower by Rs 10.1/ mmtbu.