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Last Updated: Monday, 2 August, 2004, 20:30 GMT 21:30 UK
Attacks warning pushes oil higher
Oil tanker in California
World oil demand is growing
Crude oil prices have closed at a record high in the US, lifted by warnings of possible terror attacks on global financial institutions.

September crude settled at $43.82 on the New York Mercantile Exchange, the highest closing price since the exchange began trading oil in 1983.

Earlier on Monday, the price set a new one-day record of $43.94 a barrel.

The rally followed warnings that Islamic militants may be planning attacks on financial bodies in the US.

The International Monetary Fund, the World Bank, and the New York Stock Exchange were among specific targets listed in a US government alert issued on Sunday.

Tension

Oil prices, underpinned by soaring demand from fast-growing China and instability in the Middle East, are highly sensitive to any development which could affect the global supply situation.

Last week, they hit record highs on concerns that a multi-billion dollar tax demand against Russian oil giant Yukos might force it temporarily to suspend production.

The threat alert is bringing more confusion and uncertainty into the market
John Brady, ABN Amro

John Brady, an analyst with ABN Amro, said that renewed fears of a major terrorist attack would continue to support prices for some time.

"The market is pinned to the upside when you look at the trend, " he said. "The threat alert is bringing more confusion and uncertainty into the market."

However, Tony Nunan at Mitsubishi Corporation in Tokyo, said that should an attack happen, prices would be more likely to fall.

"After 9/11 people stopped consuming because of the uncertainty. They were afraid and stopped travelling. If the target is a consuming nation, you would expect an attack to affect the market to the downside," he said.

Stock market jitters

Terror fears and worries over the economic impact of dearer oil weighed on stock markets in Europe and Asia on Monday, with Japan's Nikkei share index closing 0.9% lower, while France's Cac 40 and Germany's Dax also losing ground.

OIL PRICE TRENDS
Oil tanker

In London, the FTSE 100 managed to close marginally higher as a strong performance from heavyweight banking stocks offset a decline in oil-sensitive shares.

On Wall Street, the Dow Jones was up about 0.4% shortly before the close.

Adam Cole, an analyst with Royal Bank of Canada Capital Markets, said investors were selling European shares in favour of bonds and other investments.

"The general theme is one of risk aversion," he said.

"The terror alert in Washington and New York means we are seeing flows out of equities into bonds and out of the dollar into the Swiss franc and other currencies with strong external positions."

In London, Brent crude oil for September delivery closed 6 cents lower at $39.97 a barrel.


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