Nervous markets push oil prices up


Sun, Jul 24, 2005 - Page 10

Oil prices climbed by more than US$1 a barrel on Friday, one day after China's decision to abandon its currency peg to the US dollar, making oil prices cheaper for China, the world's second-largest consumer of crude.

The renewed terror attacks on London's public transit system led to some nervousness on the markets. But Thursday's attacks were much less serious than the initial assault two weeks ago and analysts said their effects had dissipated by Friday. A new incident on Friday, with police killing a suspect on a London subway train, also did not brake prices.

Light, sweet crude for September delivery rose US$1.52 to settle at US$58.65 per barrel on the New York Mercantile Exchange as bargain hunters stepped in. The contract had dropped US$0.89 on Thursday to close at US$57.13 after the explosions in London raised travel concerns.

In other Nymex trading, heating oil futures rose US$0.013 to US$1.5819 a gallon while gasoline rose US$0.016 to US$1.697 a gallon. On London's International Petroleum Exchange, September Brent crude futures climbed US$1.86 to settle at US$57.58 a barrel.

China's abandoning the currency peg was "a slight net positive" for country's short-term oil demand, since imported crude will be cheaper in yuan terms, Barclays Capital said.

"If we are right, then the flow of diesel and gasoline exports out of China could slow down and crude oil imports pick up," said Kevin Norrish, director of commodity research.

But some analysts suggested that Beijing's currency moves will eventually lead to less domestic oil consumption -- and falling prices.