Crude prices closed modestly lower today, Monday, 24 March, 2008 as the dollar continued to rally. Prices had been continuing to slip ever since Federal Reserve decided to cut overnight lending rates by 75 bps to bring it down to 2.25% to strengthen the economy last week.
Crude-oil futures for light sweet crude for May delivery closed at $100.86/barrel (lower by $0.98/barrel or 1%) on the New York Mercantile Exchange. Prices earlier dropped to $99.5 and rose to a high of $102.4. Crude prices are 62% higher on a yearly basis. The crude ended last week lower by more than $7 (6.8%) .
In the currency market today, the dollar pared euro gains but extended its rise against the yen, as stocks rallied after data showed U.S. February existing homes sales beat expectations and rose for the first time in seven months. The dollar index, which measures the greenback against a basket of six currencies, was at 72.93, up from 72.87 before the data. But losses in crude price was limited due to the stronger than expected economic data.
A stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies. On the other hand, crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also lowers oil producers' dollar revenue and forces them to raise prices.
Exchanges in New York and London were closed on 21 March for the Good Friday holiday.
Brent crude oil for May settlement today fell $0.52 (0.5%) to $99.86 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 advances on weather concerns
Natural gas advanced on speculation colder temperatures will boost demand for the fuel for heating and reduced output from nuclear power plants will increase its use for power generation. Gas for April delivery rose 26.4 cents (2.9%) to settle at $9.329 per million British thermal units.
Against this backdrop, May reformulated gasoline edged up 2.27 cents to $2.635 a gallon and May heating oil fell 3.23 cents to $2.8741 a gallon.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude's biggest yearly gain in five years.
OPEC left production targets unchanged on its 5 March meeting at Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day. Also over the weekend, it was reported that OPEC President Chakib Khelil said oil prices would range between $80 and $110 a barrel for the rest of 2008.
At the MCX, crude oil for May delivery closed at Rs 4,046/barrel, higher by Rs 11 (0.27%) against previous day's close. Natural gas for March delivery closed at Rs 366.7/mmtbu, lower by Rs 2/mmtbu (0.54%).
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