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Monday, 17 September, 2001, 17:08 GMT 18:08 UK
Oil reverses post-attack surge
An oil well in Texas
Global oil demand is tipped to fall this winter
Speculation that the US attacks could spark a surge in oil prices seems to have been exaggerated.

As full-scale oil trading resumed in New York on Monday, the price of crude fell sharply, amid rumours that the US government had urged oil producers to boost global output.

At the same time, analysts now say that world oil demand could fall sharply, at least in the short term, as economies slow.

But with continuing fears of US military retaliation in the Middle East, the mood of the oil markets remains highly nervous.

And the investor charge into other commodity markets - especially gold, a traditional safe haven in times of financial crisis - has continued unabated.

Nymex plunges

The New York Mercantile Exchange (Nymex) resumed "open outcry", face-to-face trading on Monday after a near week-long interruption.

The price of Nymex crude oil plunged by nearly $1 a barrel, to just under $26.80 a barrel.

On Friday it briefly soared as high as $29.98, its highest level in about four months, in a short session of electronic trading.

In London, Brent crude oil futures fell by a similar amount, to $28.45 in late afternoon trading.

The falls have almost completely reversed a brief but heady surge in crude prices in the days immediately after last Tuesday's attacks.

Producer plea

Meanwhile, the US authorities are piling pressure on producers to increase, or at least maintain, output.

There were reports - denied by official spokespeople - that the US Energy Department had asked oil producers' cartel OPEC to increase global production by 1 million barrels per day.

OPEC Secretary-General Ali Rodriguez admitted that he had met US Energy Secretary Spencer Abraham at the weekend, but denied that he had been asked for a supply boost.

But the US government is certainly concerned about the oil market, both because higher prices would hit petrol consumers at home, and because stable supplies are required if any military action is planned.

Demand down

The pressure on the market has been eased by forecasts that global demand could fall.

The London-based Centre for Global Energy Studies predicted that consumption could drop by as much as 400,000 barrels per day over the winter.

"The disruption caused to the US economy and to the country's trading partners, coupled with an expected denting of US consumer confidence, is expected to delay further any recovery in the US economy and could tip the world into global recession," the centre said in its Monthly Oil Report.

The expected reduction in commercial air traffic, although offset by higher military demand, was likely to cut demand for jet fuel by 100,000-400,000 barrels per day over the winter.

Gold shines

But while oil prices fell, other commodities continued to march higher.

Gold bullion continued to benefit from its status as a safe haven, with the metal fixed at its highest level since March last year.

Until the US attacks, gold prices were on a long-term downward drift, as the metal has been losing its key role in central-bank operations.

But the expectation that the US could launch military attacks, resulting in a surge in international tension, has given the market a shot in the arm.

The surge in gold prices, which are now at close to $300 per ounce, has had a knock-on effect on the markets for silver and platinum

See also:

17 Sep 01 | Business
Rate cuts help calm markets
17 Sep 01 | Business
Solemn traders return to Wall Street
13 Sep 01 | Business
Disaster planning saves Wall Street
13 Sep 01 | Business
Attacks shake oil and gold prices
12 Sep 01 | Business
US attacks hit global markets
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