Crude ends lower

Prices continue to slip as Federal Reserve chairman predicts slowdown in economy

Crude prices once again fell today, Thursday, 17 January, 2008. Price slipped after traders once again got gripped by fears of recession. The "r" word once again came into focus after fresh comments from Federal Reserve chairman, Ben Bernanke. Yesterday, Energy Department had reported that crude stockpiles rose more than expected for the first time in nine weeks. This also led to softening of crude price.

Crude-oil futures for light sweet crude for February delivery today closed at $90.13/barrel (lower by $0.71/barrel or 0.8%) on the New York Mercantile Exchange. Prices are 73% higher than a year ago. Last week, crude prices gained $5.3 (5.4%).

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

Today, Federal Reserve Chairman, Ben Bernanke reiterated that the outlook for growth in 2008 "has worsened" and "the downside risks to growth have become more pronounced." But he also said that the Fed is not forecasting a recession this year. Last week he had hinted that more interest rate cuts are on the way to help the situation from worsening further.

In Addition, the Commerce Department reported today that construction on new homes fell 14% in December to a seasonally adjusted annual rate of 1.01 million, the slowest building pace in more than 16 years.

As per yesterday's weekly inventory report by the EIA, U.S. crude inventories rose for the first time in nine weeks, up by 4.3 million barrels to 287.1 million barrels in the week ending 11 January. U.S. crude-oil imports averaged 10.4 million barrels a day last week, up 583,000 barrels a day from the previous week. U.S. refineries operated at 87.1% of their operable capacity last week, down from the previous week's 91.3%.

Brent crude oil for March settlement today fell $0.75 (0.8%) to $88.75 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 register drop

Natural gas fell after a government report showed that U.S. inventories are probably ample for cold- weather heating needs. As per EIA, stockpiles slipped 59 billion cubic feet to 2.691 trillion cubic feet in the week ended 11 January. Gas for February delivery fell 5.2 cents (0.6%) to settle at $8.081 per million British thermal units. Gas had surged in the first two weeks of January after forecasts were revised and called for colder weather.

Against this backdrop, February reformulated gasoline lost 1.54 cents to $2.2629 a gallon, and February heating oil fell 1.49 cents to $2.5035 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 February delivery closed at Rs 3,529/barrel, higher by Rs 2 (0.06%) against previous day's close. Natural gas for January delivery closed at Rs 319.4/mmtbu, higher by Rs 0.2/mmtbu (0.06%).