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Oil gains, stocks dip on fears of drawn-out war
Richard Baum in Singapore |
March 28, 2003 12:58 IST
Oil prices rose on Friday to their highest levels since the start of the Iraq war on fears an extended conflict would exacerbate fuel shortages, while Asian shares dipped as a deadly virus hit airline stocks.
The dollar firmed against the yen on speculation that Japan's central bank was intervening to weaken its currency. But its advance was capped by worries an extended war would undermine the global economy's consumer and business confidence.
"The market is becoming convinced that the war will be a long one as it seems like things are reaching a deadlock," said Mitsuru Sahara, vice president of currency dealing at UFJ Bank. "There's a strong possibility that the war will go on until May or even longer."
After surging back above $30 a barrel on Thursday, oil prices jumped another one per cent to hit their highest since the day before the war started on March 20.
Rising fuel prices helped pull down shares in airlines, which are also grappling with reduced demand because of the war and a deadly virus that has hit travel to Hong Kong and Southeast Asia.
The Tokyo stock market fell more than one per cent by early afternoon, but losses on other markets were more modest. The dollar rose about a quarter of a per cent to a fraction above 120 yen. Gold firmed to $329.30 an ounce from $328.40 at the US close and US Treasuries inched up.
Oil supply fears
Oil has risen 14 per cent this week on fears of tight supplies ahead of the US summer vacation driving season, unwinding half of its fall of the previous week.
The US army warned on Thursday it would take several months to get Iraq's southern oilfields pumping again. At the same time, clashes between warring tribal factions in Nigeria have shut down 40 per cent of oil output from Africa's biggest producer.
"Market players are eyeing the supply-demand balance. Nigeria's snags appear to be pretty serious amid speculation for a longer war," said Hiromune Fujisawa, a trader at Nihon Unicom Corp in Tokyo.
US light crude for May delivery was up 39 cents at $30.76 a barrel after rising as high as $30.84.
The rising cost of fuel for airlines has coincided with a fall in demand that has forced AMR Corp's American Airlines to consider filing for bankruptcy as early as next week.
Shares in Japan Airlines System Corp and Singapore Airlines Ltd fell more than three per cent, while Taiwan's Eva Airways Corp tumbled almost seven per cent. Hong Kong's Cathay Pacific Airways Ltd was over two per cent softer.
The Dow Jones Industrial Average fell 0.35 per cent to 8,201.45 on Thursday. The Nasdaq Composite index slipped 0.23 per cent to 1,384.25.
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