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World oil prices rebound; Brown warns of 'oil shock'
DATE:2008-5-29  FROM:  AUTHOR:  DOWN:2518
 
NEW YORK (AFP) - World oil prices rebounded to around 131 dollars per barrel Wednesday, reversing earlier losses in volatile trade amid lingering worries about stretched energy supplies, analysts said.


Prices gained as British Prime Minister Gordon Brown warned the world was facing a "great oil shock" that could only be addressed by urgent action on a global scale.


New York's main oil futures contract, light sweet crude for July delivery, shot up 2.18 dollars to close at 131.03 dollars per barrel after earlier sliding as low as 125.96.


Brent North Sea crude for July delivery rallied 2.62 dollars to settle higher at 130.93 dollars, having earlier touched an intraday low of 126.04.


The latest price action came after values had struck record peaks above 135 dollars late last week.


Brown, writing in Britain's Guardian newspaper, said: "The global economy is facing the third great oil shock of recent decades" as he called for an international plan to address soaring prices.


The British leader's warning came a day after French President Nicolas Sarkozy urged a Europe-wide cut in consumer taxes on fuel as fears of rising energy costs spark unease around the world.


The price of oil on international markets has surged by about a third since the start of 2008 and traded at 50 dollars per barrel 18 months ago.


A top economic adviser to US President George W. Bush meanwhile warned that rising oil prices could further crimp economic growth in the world's largest oil-consuming nation.


"I think the high price of oil has already cost us a significant amount in terms of economic growth," said Edward Lazear, chairman of the Council of Economic Advisers.


Lazear said red-hot oil prices would continue to dent economic growth unless something is done about the runaway values.


Some analysts suggested that prices are not likely to ease anytime soon.


"The market still remains well supported by persistent supply concerns due to rising energy demand and limited spare capacity on the supply side," said Sucden analyst Andrey Kryuchenkov.


Analysts said increased speculative trading in the oil markets has been driven by tight global supplies and a weak dollar, which makes commodities priced in the US currency cheaper for buyers armed with stronger currencies.


Prices had tumbled by over three dollars on Tuesday amid a bout of profit-taking and growing jitters about US oil demand as economists continued to debate whether the US economy will endure a recession or not.


Oil prices have risen more than fourfold in the last five years, underpinned by growing demand in China and other emerging economies.


The market has also been underpinned by unrest in crude-producing countries, particularly Nigeria, and OPEC's reluctance to hike output.


Indonesia said Wednesday that it would withdraw from the Organization of the Petroleum Exporting Countries (OPEC) after years of declining exports.
The only Asian member of the cartel has become a net oil importer and will not bother to renew its OPEC membership at the end of this year, Energy and Mineral Resources Minister Purnomo Yusgiantoro said.
OPEC, which pumps 40 percent of the world's oil, has proven reluctant to bend to US-led demands for it to pump more crude to help cool prices.

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