Prices rise on hopes that Fed will come with another rate cut tomorrow
Crude prices ended higher for the third consecutive day today, Tuesday, 29 January, 2008. Expectations about another rate cut from Federal Reserve tomorrow boosted prices. In the earlier three sessions, crude had gained almost $4.3. A lower interest rate has chances of helping the US economy warding off recession and thus boost energy demand.
Crude-oil futures for light sweet crude for February delivery today closed at $91.64/barrel (higher by $0.65/barrel or 0.7%) on the New York Mercantile Exchange. Prices are 70% higher than a year ago. Earlier it dropped to an intraday low of $90.33.
In the currency markets today, the dollar was mixed. The dollar index, which tracks the performance of the greenback against six other major currencies, was at 75.612, compared with 75.590.
Traders are expecting that U.S. Federal Reserve will reduce interest rates further tomorrow to spur economic growth in the world's largest energy consuming country.
Last Tuesday, Federal Reserve slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations. Federal Reserve's decision came as a surprise to everyone but Fed took the same as stocks markets worldwide, had been plunging on fear that US economy would be hitting a recession soon.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude's biggest yearly gain in five years.
EIA expected to show increase in crude and gasoline supplies for last week
Brent crude oil for March settlement today rose $0.62 (0.7%) to $92 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.
Natural gas declined amid forecasts for warmer weather and lower heating demand. Gas for delivery under the February contract, which expires today, fell 9.9 cents (1.2%) to settle at $7.996 per million British thermal units.
Against this backdrop, reformulated gasoline was up slightly at $2.3295 a gallon. February heating oil was down slightly at $2.5418 a gallon.
Members of the OPEC 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 1 February, 2008 meeting in Vienna. The cartel is expected to increase production.
At the MCX, crude oil for February delivery closed at Rs 3,575/barrel, higher by Rs 6 (0.17%) against previous day's close. Natural gas for January delivery closed at Rs 310.3/mmtbu, lower by Rs 4.6/mmtbu (1.5%).
Tomorrow, EIA will report the inventory status of crude and crude product inventories for week ended 28 January, 2008. Market is expecting a build up in both cases.
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