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oil price, war, virus - article

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    Oil Rises, Airlines Slide on War Worries
    Thursday March 27, 9:46 pm ET
    By Richard Baum


    SINGAPORE (Reuters) - 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 deady virus hit airline stocks.

    The dollar firmed against the yen on speculation Japan's central bank might intervene 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 percent in early Asian trade 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.

    Shares in Qantas Airways Ltd, Australia's largest airline, dived 12 percent as it warned the war and the virus meant it may not meet analysts' profit forecasts.

    The Tokyo stock market eased 0.5 percent, with other markets in the region down by a similar amount or unchanged. The dollar rose about a quarter of a percent to a fraction above 120 yen. Gold firmed to $329.10 an ounce from $328.40 at the U.S. close.

    GASOLINE SHORTAGE

    Oil has risen 14 percent this week as a fall in U.S. gasoline stocks sparked fears of tight supplies ahead of the nation's summer vacation driving season.

    That has unwound half of its fall in the previous week, when traders bet heavily on a quick U.S. victory with little disruption to Iraqi oil flows.

    But the U.S. army officer in charge of rehabilitating Iraq's southern oilfields on Thursday warned it would take several months to get the fields pumping again because of suspected booby traps, blazing wellheads and neglect.

    Bloody clashes between warring tribal factions in Nigeria have also shut down 40 percent of oil output from Africa's biggest producer.

    U.S. light crude for May delivery was up 21 cents at $30.58 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 Hong Kong's Cathay Pacific Airways Ltd fell more than three percent, while Japan Airlines System Corp, Singapore Airlines Ltd and Taiwan's Eva Airways Corp all lost more than two percent.

    Tokyo's Nikkei stock average had eased 0.5 percent to 8,325.33 by mid-morning, tracking losses on Wall Street.

    "Most institutional investors are sticking to the sidelines," said Hiroshi Sato, general manager of equities at Cosmo Securities. "That leaves Internet traders, individuals and public pension funds to give direction to the market," he said.

    The Hong Kong, Singapore and Australian markets were little changed, while South Korea and Taiwan dropped about 0.6 percent.

    The Dow Jones Industrial Average fell 0.35 percent to 8,201.45 on Thursday. The Nasdaq Composite index slipped 0.23 percent to 1,384.25.

    The dollar was quoted around 120.35 yen against 120.00 in late New York trade. The euro weakened to $1.0674 versus New York's closing level of $1.0695.


 
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