Prices rise more than $2 as crude inventories for last week rise less than expected

Crude prices ended substantially higher today, Thursday, 14 February, 2008. Prices rose today after Energy Department yesterday reported that that crude inventories for last week rose less than expected.

Crude-oil futures for light sweet crude for March delivery today closed at $95.46/barrel (higher by $2.19/barrel or 2.1%) on the New York Mercantile Exchange. The price earlier rose to an intraday high of $95.6. Prices are 65% higher than a year ago.

As per the weekly inventory report by EIA yesterday, U.S. crude inventories rose for a fifth week, up 1.1 million barrels to 301.1 million barrels in the week ending 8 February. Market was expecting a rise of 2 million barrels. U.S. crude imports averaged 9.7 million barrels per day last week, down 777,000 barrels per day from the previous week. U.S. refineries operated at 85.1% of their operable capacity last week, up from the previous week's 84.3%.

Brent crude oil for March settlement today rose $1.77 (1.9%) to $95.09 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.

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

OPEC ministers to study a proposal to price oil in a currency other than the U.S. dollar

In a monthly report released earlier this week, EIA said the world oil market is poised to ease over the next two years with production increases offsetting moderate growth in oil demand.

Natural gas price rose substantially today. Natural gas in New York advanced to the highest in 15 months as supplies of the fuel declined and on speculation the U.S. may avoid a recession, lifting demand. Natural gas for March delivery rose 38.4 cents (4.6%) to settle at $8.772 per million British thermal units. Natural gas rallies more than 17% this year

Against this backdrop, March reformulated gasoline rose 8.62 cent to $2.4761 a gallon and March heating oil gained 5.1 cents to $2.6666 a gallon.

It was also reported today that OPEC finance ministers will meet to study a proposal from Venezuela to price oil in a currency other than the U.S. dollar. Dollar's decline against the euro over the past year has cut into the group's purchasing power.

Last Friday, two ministers of Organization of Petroleum Exporting Countries (OPEC) hinted that the cartel might go for a production cut in its next meeting at March, 2008. This spurted up crude prices and the same ended almost 4% higher on that day. At its 1 February meeting at Vienna, OPEC members decided to keep current output levels unchanged.

At the MCX, crude oil for February delivery closed at Rs 3,750/barrel, higher by Rs 41 (1.1%) against previous day's close. Natural gas for February delivery closed at Rs 342.8/mmtbu, higher by Rs 6.9/mmtbu (2.05%).