Oil prices rise 4% on back of bank bailouts

OIL PRICES rose more than 4 per cent as global markets rallied after governments launched bailout schemes to shore up banks.

US crude settled up $3.49 to $81.19 a barrel, after concerns about the effect of the financial crisis on demand and a flight of investors into safer havens sent prices to the lowest level since September 2007 on Friday.

London Brent crude rose $3.37 to settle at $77.46 a barrel.

"I think the bank bailout packages may have stabilised financial markets and we're just following them higher," said Tom Bentz, of BNP Paribas Commodity Futures. "The dollar is weaker against the euro as well, and the Saudis cut November oil shipments to Europe."

Investors rushed into oil and other commodities this year as a hedge against the weak dollar and inflation, before slowing fuel demand in the US and other developed economies knocked crude from record highs above $147 set in July.

The drop in crude prices has prompted some members of the Organisation of Petroleum Exporting Countries to call for a reduction in production levels when the cartel holds an emergency meeting on November 18th.

Iraq's oil minister Hussain al-Shahristani said yesterday Opec would consider cutting output if the world does not need its oil.

"There has been a reduction in demand and the current production of Opec is more than the market can absorb," he said.

Saudi Arabia, Opec's most influential member, cut November supplies to one major European refiner, according to a trade source, but told Asian refiners shipments would not be changed.

Goldman Sachs, a long-standing commodity bull, became a near-term bear yesterday after conceding financial turmoil would take a far bigger toll on demand and that oil prices could hit $50 if the crisis deepened.

- (Reuters)