Oil: Price rises above US$72 on China demand

LONDON - Oil rose above US$72 a barrel, boosted by a jump in demand from energy-hungry China and continued tension between Iran and the West over Tehran's nuclear programme.

Gold and silver also gained as investors moved back into the market after recent price weakness. A flow of money from investment funds has helped send the price of many commodities to record or decade-highs in 2006.

"We're still in this bullish mode and people are looking for bullish headlines," said analyst Deborah White of SG in Paris. "Between China and Iran, if you pick and choose, you had two." US crude for July delivery settled up 66 cents at US$72.03 a barrel. London Brent crude gained 46 cents to US$71.05. Both markets were closed yesterday for holidays.

Oil in New York has fallen from its record high of US$75.35 reached in April, partly on worries that high prices will accelerate inflation and slow growth in demand for oil.

But demand in China, the world's second-largest consumer, remains robust, calculations based on official data showed.

China's apparent demand climbed 10.8 per cent in April from a year earlier, the highest rise since 2004.

Oil's gain came despite an assurance from oil cartel Opec that it will do all it can to keep consumers well-supplied when oil ministers meet in Caracas on Friday.

Opec President Edmund Daukoru told Reuters the group, source of more than a third of the world's oil, will probably keep output unchanged on Friday and keep pumping as much as it can to ease concern of a shortage.

Prices are responding to growing tensions between Iran, Opec's second-largest producer, and the United States over Iran's nuclear work, he said. Traders are also jittery over the forthcoming hurricane season in the Gulf of Mexico and new environmental laws on motor fuels in the United States, he added.

"These are all symptoms of a tight market where small disruptions have a disproportionate response," he said. "It's a crazy countercyclical situation." Host Venezuela, which has become Opec's fiercest price hawk under left-wing President Hugo Chavez, said the cartel should cut output because there was already too much oil in stock.

But Energy and Mines Minister Rafael Ramirez conceded that ministers might not back that option due to high prices.

Also on Friday, foreign ministers of six major powers are to meet in a bid to resolve the crisis over Iran's nuclear work, the Chinese Foreign Ministry said today.

Iran said yesterday it had no intention of moving all its uranium enrichment work to Russia to allay fears it could use nuclear fuel technology to make atomic bombs.

Opec has been pumping more or less flat out for more than a year, though militant attacks in Nigeria have cut back production there by around a quarter, and there is no sign that supply will resume any time soon.

Royal Dutch Shell Plc. said today it had yet to send teams to its closed oilfields in Nigeria, a necessary step in resuming 455,000 barrels per day of supply shut down in February after attacks by militants.

- REUTERS