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Oil prices swing wildly in China uncertainty

AFP  |  London 

Fragile financial markets are grappling with wild swings in world oil prices, unnerved by uncertainty over global supplies and the demand outlook from China.

By the close of business Monday, the price had shot up 27 percent in just three days for the US benchmark contract, West Texas Intermediate for October delivery, rebounding from six and a half year lows.

But they skidded again Tuesday when weak Chinese manufacturing data cemented concerns over demand from the world's biggest commodities consumer.

Later in the week oil prices got a boost from the European Central Bank, which on Thursday held out the prospect of yet more stimulus for the eurozone economies if needed.

By the end of the week, crude oil prices were trading in London on Friday evening barely changed.

Brent North Sea crude sold at USD 49.95 a barrel -- down from USD 50.17 a week earlier. The WTI contract traded at USD 46.22, up from USD 45.22.

Crude oil, the world economy's most important raw material, has roughly halved in price in a year.

"The fall in commodity prices has looked particularly dramatic because it has included oil," said Julian Jessop, chief global economist and head of commodities at London-based research group Capital Economics.

While many raw materials have been declining in price since 2011 as China's booming economy began to slow, oil's price had been propped up by a perceived threat to supply after the Arab Spring, Jessop said in an interview.

"Once the concerns about the potential threat to supply from the Arab Spring disappeared and were replaced by the reality of massive oversupply because of the shale revolution in the United States and OPEC's response of keeping production high when people had thought it might cut, then oil tanked," the analyst said.

Keeping pressure on oil prices, Iraq has managed to boost production this year by 1.5 million barrels per day despite the conflict with extremists including Islamic State jihadists and Iran is set to raise exports as sanctions are lifted after an agreement was reached over its nuclear programme.

Despite the uncertainty on commodity markets, the price of gold -- a safe haven -- lost its shine over the past week, hurt by a rally in the US dollar.

The precious metal also lost its lure as a haven at as volatile Chinese markets took a holiday on Thursday and Friday to mark the 70th anniversary of the end of World War II.

On the London Bullion Market, gold was trading at USD 1,118.25 dollars an ounce Friday against USD 1.135 dollars a week before.

First Published: Sat, September 05 2015. 01:28 IST