Business | Oil & Gas
Oil rebounds after fall on China fuel price hike
Oil rose by almost $3 a barrel on Friday as the view gained ground that a surprise fuel price increase by China may actually boost rather than curtail demand for fuel.
- Agencies
- Published: 18:03 June 20, 2008
London: Oil rose by almost $3 a barrel on Friday as the view gained ground that a surprise fuel price increase by China may actually boost rather than curtail demand for fuel.
Oil plunged nearly $5 in the previous session after China raised pump gasoline and diesel prices by up to 18 per cent, its first hike in eight months as the government bowed to a nearly $40 increase in crude prices since the last hike in November.
US July crude, which expires on Friday, rose $2.68 to $134.61 a barrel by 1214 GMT, after slipping earlier in the day. London Brent was $2.76 up at $134.76.
Initial forecasts suggested the Chinese move would hurt demand, but some analysts now say consumption will rise as the price increase will encourage healthier supply at the pumps.
Chinese fuel pumps have faced long queues and rationing as refiners cut back on production to limit hefty losses made by selling discounted fuel.
Demand from China, India and the Middle East has been cited as a factor behind oil's almost sevenfold surge from $20 six years ago to a record high of nearly $140 a barrel this week.
High fuel costs have dented demand in other consumers, such as the United States and Britain.
Meanwhile, Opec President Chakib Khelil told the Algerian official news agency APS that demand by consumer countries for Opec to increase its offer of oil is "illogical and irrational".
His interview came ahead of a meeting of oil producing countries, consumer countries and oil firms in Saudi Arabia on Sunday.
"The (Saudi Arabia) meeting would clarify the positions about the reasons behind this oil prices rise," he added.
He cited speculation, geopolitical tensions and limited refinery capacitys as the "most important reasons" behind the soaring oil prices.
Khelil, who is Algeria's energy and mining minister, suggested there would be no decision by Opec as a cartel at the meeting in Saudi Arabia.
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