Crude oil drops

Crude prices slip after traders speculate a buildup in crude inventories for first time in nine weeks

Crude prices fell by more than $2/barrel today, Tuesday, 15 January, 2008. Price slipped after traders once again speculated a recession hitting US in the near term. Traders also speculated that tomorrow's inventory report might show a build up in inventories for the first time in two months. Comments from Organization of Petroleum Exporting Countries official that the cartel is ready to increase production also led to softening of the price.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude's biggest yearly gain in five years.

Crude-oil futures for light sweet crude for February delivery today closed at $91.98/barrel (lower by $2.22/barrel or 2.4%) on the New York Mercantile Exchange. Prices are 72% higher than a year ago. Last week, crude prices gained $5.3 (5.4%).

The U.S. Commerce Department reported today that U.S. retail sales fell 0.4% in December, the first decline in six months. The figure capped the weakest year since 2002.

Elsewhere, the Saudi Arabia, oil minister said that OPEC will raise supply, if justified.

Brent crude oil for February settlement today fell $2.02 (2.2%) to $90.90 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, gasoline and heating oil – all fall

Natural gas declined after a government report signaled the U.S. economy is slowing and crude oil fell. Gas for February delivery fell 15.7 cents (1.9%) to settle at $8.196 per million British thermal units.

Against this backdrop, February reformulated gasoline fell 6.36 cents to $2.3092 a gallon and February heating oil slid 4.2 cents to $2.5472 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.

At the MCX, crude oil for January delivery closed at Rs 3,582/barrel, lower by Rs 105 (2.8%) against previous day's close. Natural gas for December delivery closed at Rs 317.9/mmtbu, lower by Rs 7.9/mmtbu (2.4%).

Tomorrow, EIA will report the inventory status of crude oil and fuel products for week ended 11 January, 2008. Market expects EIA to report that crude oil inventories gained 1.25 million barrels last week.