Crude price gain more than $4 registering the biggest single day increase since January, 2007
Crude prices soared by more than $4/barrl today after crude inventories drooped for the fourth straight week. Plans by Central banks to inject more liquidity across financial markets worldwide also imparted a feeling that economy would pick up thereby raising demand for oil and this also led to increasing crude price.
For the day ending Wednesday, 12 December, 2007, crude-oil futures for light sweet crude for January delivery closed at $94.39/barrel (higher by $4.37/barrel or 4.9%) on the New York Mercantile Exchange. It was the highest increase in price since January of this year. Prices reached a high of $99.2 on 21 November. Prices are up 47% from a year ago.
As per the weekly inventory report disclosed by the EIA, U.S. crude inventories dropped for a fourth week in the week ending 7 December, down 700,000 barrels. At 304.5 million barrels, U.S. crude inventories were at their lowest since March, 2005, but are still in the upper half of the average range for this time of year. U.S. refineries operated at 88.8% of their operable capacity last week, down from the previous week's 89.4%.
EIA also reported U.S. gasoline supplies rose by 1.6 million barrels to 202.2 million barrels while distillate stocks, which include heating oil and diesel, decreased by 800,000 barrels to 131.5 million barrels in the week under review.
The Federal Reserve said it would inject cash into money markets through some term-auction facilities. The Fed, along with the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Canada, will provide cash to the money market to get through in the coming months.
Yesterday, Federal Reserve lowered the federal funds rate by a quarter-point to 4.25%. The Fed also lowered its discount rate, the interest it charges on direct loans it makes to banks, by a quarter-point to 4.75%.
In the currency market today, the dollar was mixed slipping against the euro and pound but jumping against the yen, in line with growing risk appetite. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, edged down 0.1% at 76.150.
Brent crude oil for January settlement rose $4.03 (4.5%) to $94.02 on the London-based ICE Futures Europe exchange.
All fuel products rise anticipating good demand from economic growth
Natural gas futures in New York rose as crude oil advanced on speculation that a decision by central banks to increase cash supplies will boost economic growth and spur energy demand. Natural gas for January delivery rose 32.3 cents (4.6%) to settle at $7.408 per million British thermal units.
Against this backdrop, January reformulated gasoline rose 12.14 cents to $2.4128 a gallon and January heating oil gained 12.02 cents to $2.6432 a gallon.
Members of the Organization of Petroleum Exporting Countries left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a Feb. 1 meeting in Vienna.
As per EIA, global oil markets will likely remain tight through 2008 and monthly average oil prices are expected to near $85 per barrel over the next year. World oil consumption in 2008 is projected to rise by 1.4 million barrels.
At the MCX, crude oil for December delivery closed at Rs 3666/barrel, higher by Rs 137 (3.7%) against previous day's close. Natural gas closed at Rs 291.2/mmtbu as against previous close of Rs 278.8/mmtbu, higher by Rs 12.4/ mmtbu.