After four sessions of drop, crude oil prices rose for the first time today, Tuesday, 07 October, 2008. Prices rose after fresh Middle East tensions resurfaced and investor worries fell a bit as they thought that global energy demand will not drop drastically in the coming months. Crude finished off the day's high as U.S. stocks weakened.
Crude-oil futures for light sweet crude for December delivery closed at $90.06/barrel (higher by $2.25 or 2.6%) on the New York Mercantile Exchange. Prices rose to a high of $90.6 during intra day trading. Prices reached a high of $147 on 11 July but have dropped almost 50% since then. Till date this year, prices have dropped by 6.2% till date.
As per reports today, Iran claimed that it forced down a Western aircraft on Sunday that accidentally entered its airspace, then allowed it to continue the next day to Afghanistan after questioning the passengers. This perked up crude prices partly today.
At the currency markets on Tuesday, the dollar gained against the yen but remained under pressure after the Federal Reserve said it would buy commercial paper in an attempt to revive frozen credit markets and ease overall borrowing costs. The yen rallied against both the dollar and the euro as investors fled to safe-haven currencies on ongoing worries about credit markets and the impact of the financial crisis on institutions in the U.S. and Europe. The dollar index, which measures the U.S. unit against a basket of major currencies, remained under pressure, trading at 81.093, down from 81.300 in morning trade and 81.593 on late Monday.
For the third quarter of the year crude prices ended lower by 28%. This was the biggest quarterly drop since 1991. Before that, crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. For the month of September, prices registered drop of 13%.
Investors are concerned that a prolonged credit crisis would further undermine an already waning demand for energy as global growth slows down.
Against this background, November reformulated gasoline closed at $2.0628 a gallon, up 0.4 cent, while November heating oil gained 3.2 cents to end at $2.5057 a gallon.
Natural gas for November delivery declined by 6.7 cents to finish at $6.768 per million British thermal units.
At the MCX, crude oil for October delivery closed at Rs 4,205/barrel, lower by Rs 47 (1.09) against previous day's close. Natural gas for October delivery closed at Rs 328.2/mmbtu, lower by Rs 5.8/mmbtu (1.7%).
The U.S. Energy Department's Energy Information Administration will issue a weekly update on petroleum supplies tomorrow. Expectations for the data were mixed.
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