Oil prices edge higher in Asian trade

SINGAPORE (AFP) - Volatile world oil prices edged up in Asian trade Thursday after sharp falls on a bigger-than-expected rise in US crude reserves, analysts said.

New York's main futures contract, light sweet crude for August delivery, had dropped more than 10.50 dollars over two days, largely because of fears that slowing economic growth will hurt demand for oil.

On Thursday the benchmark contract rose 34 cents to 134.94 dollars a barrel after closing Wednesday in the US at 134.60, off 4.14 dollars.

That fall followed a dive of 6.44 dollars on Tuesday, its sharpest daily decline since January 1991.

Brent North Sea crude for September delivery gained 32 cents to 136.13 dollars. The Brent August contract expired on Wednesday, down 2.56 dollars at 136.19 dollars in London.

"The market is currently in a situation of extreme volatility," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

In its regular weekly report, the US government's Energy Information Administration said Wednesday that crude inventories rose by 3.0 million barrels to 296.9 million barrels in the week ending July 11.

That confounded market expectations for a decline of 2.2 million barrels.

"The inventory report essentially indicated oil demand in the US is just very poor," said Shum.

The oil price "is edging up a bit... the fact that it has dropped so much in two days, some view it as a buying opportunity," he said.

Traders were watching developments in the Middle East after what appeared to be a sudden shift in US diplomatic policy toward Iran announced late Tuesday, which likely would impact the oil market, analysts said.

The United States said it was sending Under Secretary of State William Burns to nuclear crisis talks on Saturday between Iran's nuclear negotiator, Saeed Jalili, and the European Union's foreign policy chief, Javier Solana.

"This is the most significant US diplomatic contact since the 1979 Islamic revolution, and represents a dramatic shift in US foreign policy," said John Kilduff, an analyst at MF Global.

"For our purposes, it will certainly take some of the force out of a major source of the geopolitical premium in oil prices," he said.

The US and other Western powers have been locked in a long-running standoff with Iran over its nuclear drive.

Iran has repeatedly refused to heed United Nations demands to suspend uranium enrichment, insisting that its activities are exclusively aimed at energy production.

Some Western nations fear Iran's nuclear programme could be aimed at making an atomic bomb.

Iran is the world's fourth-largest crude producer and tensions over its nuclear effort helped push oil prices higher recently.

Saudi Arabia on Wednesday denounced speculative trade in oil and called for more dialogue between producing and consuming nations.

"We don't want the price to be so high. It is not in our interest because it is not in the interest of the rest of the world," Saudi Arabian King Abdullah in an interview with the Italian daily La Repubblica.

Saudi Arabia is the biggest producer in the Organisation of the Petroleum Exporting Countries (OPEC) cartel.

Oil prices had soared after breaking through 100 dollars at the start of 2008, and hit peaks above 147 dollars last Friday. The record prices sparked protests around the world, and fears for economic growth.

• Email Story
• IM Story
• Printable View
• Blog This

Recommend this article

Sponsored Links

(What’s this?)