Oil: Price leaps on commodity rebound

Oil surged above US$71 on Tuesday as commodities rebounded from last week's sell off and the US government predicted another rough Atlantic hurricane season.

US crude for July delivery rose US$1.29 to US$71.25 a barrel by 1410 GMT.

London July Brent crude climbed US$1.30 to US$70.65.

Precious and industrial metals surged higher after a sharp fall last week, which wiped nearly 5 per cent off oil, as investors worried record raw material prices would mean stronger inflation, higher interest rates and reduced demand.

But analysts predicted inflationary concerns would not significantly impact economic growth.

"The view remains that the basic economic trends supporting the global growth outlook remain intact and the recent downturn in the asset markets will likely be reversed," Goldman Sachs said in a research note.

On Tuesday, copper prices jumped more than 5 per cent, while oil, gold and aluminum each rose 2 per cent.

Predictions for another active hurricane season also helped support crude prices.

The US National Oceanic and Atmospheric Administration said 2006 could see up to 10 hurricanes. Last year's weather onslaught on the oil and gas production hub of the Gulf of Mexico saw offshore platforms toppled, undersea pipelines ruptured and several coastal refineries flooded.

"Predictions for a strong hurricane season have been around for a while, but there are some firm numbers and probabilities attached now," said Andrew Harrington, resources analyst at Australia and New Zealand Bank (ANZ) in Sydney.

"If they come to pass it looks like a rough season, which could impact output still recovering from last year." About 20 per cent of the Gulf's 1.5 million barrels per day (bpd) of crude oil output, along with 13 per cent of the region's 10 bcfd of natural gas production, has been shut since the record 2005 storm season that pushed US crude above US$70 for the first time.

Rising US petrol inventories could provide some relief from high prices, with a Reuters poll of analysts predicting a fourth consecutive weekly jump -- by an average 1.4 million barrels -- when government data is released on Wednesday.

Refineries are cranking up production ahead of the Memorial Day holiday weekend on May 29, the traditional launch of the US summer petrol season when drivers take to the roads for holidays.

The world's second-largest oil consumer China will raise state-capped retail petrol and diesel prices from Wednesday to take them 15 per cent higher so far this year.

Analysts say this is not enough to stop refiners from making losses but is likely to slightly hit demand growth.

- REUTERS