Crude pierces US$68, Asian equities retreat
Oil prices surged to another record high of US$68 in early trade yesterday, but declined during the day as concerns about supply disruptions in the Gulf of Mexico due to tropical storm Katrina eased.
Asian equity markets were mostly lower as investors started to digest the negative impact of rising energy costs. In Hong Kong, off-shore oil producer CNOOC gained enough to lift the entire Hang Seng Index to its first gain in three days.
Crude oil for October delivery rose 2.5 per cent to a close of US$67.32 a barrel on the New York Mercantile Exchange on Wednesday and went on to hit the new high of US$68 in electronic trading.
The March contract hit US$70, indicating traders expect little relief on prices between now and then. By last night, the price on the October contract had fallen to US$66.90 after weather reports indicated Katrina would probably miss the big US oil fields. It rebounded to US$67.50 early today.
Analysts expect the upward pressure on oil prices will remain. Reuters quoted financial betting firms as saying they will be willing to accept bets on US$100 a barrel oil once the price pierces US$70.
Data showing a greater-than-expected decline in US petrol inventories on Wednesday was as much to blame for the rise in prices as the potential storm damage.
IMF managing director Rodrigo Rato said the price of oil was the most important risk to Asian growth. 'If high prices persist, the impact will be considerable.'
China National Petroleum Corp, parent of Petrochina, signed a preliminary accord to form a joint venture with Petroleos de Venezuela to develop and manage oil fields in Venezuela, Bloomberg reported.