Crude Oil : Reverses from higher levels

Oil prices recorded a new all-time high of $139.89 a barrel in NYMEX yesterday, but subsequently backed away to close in the red as focus shifted back to the lower global demand estimates.



Crude oil July in NYMEX settled at $133.50 ($134.86) yesterday, after trading in the range $139.89 - $132.84.



Oil prices rose early in the day after a fire forced Norwegian oil company StatoilHydro to halt oil production at a North Sea platform.



The oil cartel OPEC in its latest monthly oil market report released on Friday cut its estimate for 2008 global oil demand to an increase of 1.1 million barrels a day, from an increase of 1.17 million barrels projected earlier. The total global oil consumption was revised to 86.88 million barrels a day from the previous estimate of 86.95 million barrels a day.



Reports that Saudi Arabia, the world’s biggest oil exporter, is considering increasing its output next month by about a half-million barrels a day to a production level of 10 million barrels a day also affected the market sentiments.



Earlier, the International Energy Agency lowered its forecast for average global oil product demand in 2008 to 86.8 million barrels a day, down 80,000 barrels a day from its previous estimate.



According to the latest energy-outlook report from the US Energy Information Administration, global oil consumption was up a lower than expected 630,000 barrels per day during the first quarter of 2008 compared with year-ago levels, against the expected growth by 1 million barrels a day.



But the US Energy Department’s weekly inventory report last week had revealed that the nation's crude supplies dropped 4.6 million barrels to 302.2 million barrels for the week ended June 6, taking the total fall in crude inventories to 23.6 million in four weeks.



The price of benchmark contract of crude oil in the New York Mercantile Exchange had soared over $10 to a new all-time high of $139.12 a barrel on June 6th , recording the biggest one-day gain in dollar terms, as geo-political tensions were ignited by Israel’s threats to strike on Iran over its nuclear programme.



Potential supply threats due to geo-political tensions and the Atlantic hurricane season and OPEC’s unwillingness to increase output despite high prices continue to underpin oil prices.



The Atlantic hurricane season officially began on June 1st. Arthur, the first Atlantic storm of the season, made landfall on Sunday near Mexico forcing the closure of two export terminals, but afterwards weakened to a tropical depression creating heavy rains in the Gulf of Mexico.



Repeated attacks on Nigerian oil facilities sustain concerns on supply from the oil–rich Niger Delta.



Meanwhile, Iran has cut its crude oil exports by 200,000 barrels a day since February 20 due to a seasonal fall in demand for crude oil during the refinery maintenance period. Iran is the world's fourth biggest oil exporter, currently producing around 4 million barrels a day, of which roughly 2.5 million barrels a day is exported.



DWTI (July) traded in the range $139.77 - $133.66 and closed at $135.34 ($135.47).



Weekly Outlook (NYMEX Crude oil July)

Resistances are $137, $138.14 and $139.14; supports $134, $132.35, $131.30. Expecting more weakness below $132.35.




TECHNICAL OUTLOOK (Intra-day)

DGCXCrude (July) - Bullish above 136.25; bearish below 135.72

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