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22 Sep 2008 16:10
Oil prices rose on Monday as investors grappled with the possible effects on crude demand of a $700-billion United States proposal to buy bad mortgage debt.
Light, sweet crude for October delivery was up $1,82 to $106,37 a barrel, after falling as low as $103,35, in electronic trading on the New York Mercantile Exchange by mid-afternoon in Europe. On Friday, the contract rose by $6,67 to settle at $104,55 on initial hopes the rescue plan would stabilise the US financial system and help boost economic growth.
“There are a lot of issues to be filled in.
It’s an extraordinarily complex situation,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.
US congressional leaders endorsed the plan’s main thrust, saying passage might occur in a matter of days. But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation, House Speaker Nancy Pelosi said on Sunday.
Treasury Secretary Henry Paulson pushed lawmakers, who received the package on Saturday, to approve the proposal as soon as possible.
The Federal Reserve also announced late on Sunday that it granted a request by investment banks Goldman Sachs and Morgan Stanley to change their status to bank holding companies, a move that will allow the two institutions to open commercial banking subsidiaries, greatly bolstering their resources.
Traders were also watching news from Nigeria, where the country’s main militant group in the southern oil region on Sunday declared a unilateral ceasefire, ending the worst spate of militant attacks in years.
The Movement for the Emancipation of the Niger Delta said it was ceasing hostilities immediately after appeals from elders and politicians in the region. Three years of attacks have cut Nigeria’s oil production from 2,5-million barrels per day to about 1,5-million barrels.
The group warned it would launch another spate of attacks if the military raided one of the group’s base camps.
Moore said the Organisation of the Petroleum Exporting Countries’s decision earlier this month to cut production by 520 000 barrels a day and output shutdowns and damage to oil installations caused by Hurricane Ike and Gustav would have influenced investors more if not for the US financial turmoil.
“The ceasefire [in Nigeria] should be slightly bearish,” Moore said. “Recent supply-side news, which has been pushed to the background by other developments, has been poor.”—Sapa-AP
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