Oil sheds earlier gains and slips to $61 a barrel

COMMODITIES:OIL PRICES fell towards $61 a barrel yesterday, shedding some of the previous session's gains, on risk aversion after North Korea said it had conducted an underground nuclear test.

Still, prices hovered around a six-month high as a weak US dollar and expectations the Organisation of the Petroleum Exporting Countries (Opec) would keep its official production targets unchanged during its meeting on Thursday.

US crude futures for July delivery fell 29 cents to $61.38 a barrel in early trading, but the contract settled up 62 cents at $61.67 a barrel on Friday, boosted by data showing a big increase in Chinese demand, along with a weak dollar.

London Brent crude fell 38 cents to $60.40.

“There is a short-term kneejerk negative impact on oil prices but the impact will be quite limited since the two Koreas are not suppliers of oil, so there won’t be any disruptions to supply,” said Victor Shum, an analyst at Purvin Getz in Singapore.

North Korea conducted an underground nuclear test yesterday, heightening tension in the economic powerhouse of East Asia and prompting UN Security Council members to call an emergency meeting

Analysts said a weak dollar, now languishing near its lowest level this year, would continue to offer support to oil.

Oil prices rallied about 9.5 per cent last week, boosted by a spate of US refinery problems and unrest in major oil exporter Nigeria, and are nearly double their lows hit in December on hopes the economic recession is easing.

Nigeria’s main militant group said yesterday it had attacked key oil pipelines in the Niger Delta to prevent five-flow stations feeding a facility operated by US Chevron from operating. However, there was no independent confirmation of the claim.

Saudi Arabian oil minister Ali al-Naimi said Opec would “probably stay the course” when it meets this week as he forecast a pick-up in demand and prices eventually rising towards $75 a barrel.

Algeria’s oil minister said Opec was unlikely to cut output at its meeting next week amid a weak global economy.

China wants to set up a 3 million tonnes reserve of oil products this year, which is practically impossible, a researcher at a think tank run by the country’s top oil refiner Sinopec Group, was quoted as saying last Sunday. – (Reuters)