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Last Updated: Wednesday, 14 May, 2003, 06:27 GMT 07:27 UK
Oil rises after Saudi bombing
An ambulance rushing to the site of the bombings in Saudi Arabia
The price of oil has risen after three suicide bomb attacks directed at foreigners in Saudi Arabia reignited fears about security in the region.

In morning trade in Asia, US light crude futures for June traded at $28.53 a barrel, up slightly from its close of $28.50 in New York.

Benchmark Brent crude oil prices closed up $1.01 on Tuesday at $25.90.

The suicide car bombings in the Saudi capital of Riyadh on Tuesday killed at least 29 people and sparked concern that oil supplies would be disrupted.

But analysts said the fears were unfounded.

"The attacks in Saudi have not disrupted oil supplies. Prices are too high given the prevailing weak oil demand, said one dealer.


Before the US-led war with Iraq, oil prices reached $40 a barrel, but they have been subdued since the conflict ended earlier this month.

"The bombings bring uncertainty," said Katsunori Watanabe, director of research at Nihon Unicom Corp in Tokyo.

"Saudi is the biggest producer of oil and any attack on the oil sector would be a disaster. Will there be more attacks, and where?"

The market was also unsettled by an International Energy Agency warning that oil inventories in developed countries are nearing a 20-year low relative to normal stocks.

Demand down?

But the IEA's monthly market report issued on Tuesday also predicted demand for oil was falling.

It anticipates 2003 oil sales will be down almost 9%, thanks in large part to the impact of the Sars virus on consumption in Asia - although it also warned of reduced stockpiles.

But the attacks in Saudi Arabia, which holds the world's biggest reserves of crude oil, were bound to affect prices.

They took place just hours before a visit from the US Secretary of State Colin Powell.

On the way up

Oil prices might have begun inching higher even without the bombings.

The oil producers' cartel Opec said last month that it would cut production to make sure that prices stayed at about $25 a barrel even if Iraqi oil came rapidly back on stream.

That was taking longer than expected, Opec President Abdullah al-Attiyah said on Monday, suggesting that the next scheduled Opec meeting later in May could well avoid further output cuts.

Iraq was pumping close to 2.5 million barrels a day before the US-led attack, and is expected to claw its way back to only a million barrels a day by next month, well short of earlier more bullish predictions.

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