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Oil trades lower as China set to raise fuel prices

business Updated: Jun 20, 2008 12:19 IST
Oil trades lower as China set to raise fuel prices

Oil prices were down in Asia on Friday after China said it was raising domestic fuel prices and Saudi Arabia announced an output increase.

Saudi Arabia, the biggest producer in the OPEC cartel, said it planned to increase oil output by 200,000 barrels per day.

The announcement came as Anglo-Dutch oil giant Shell said it shut down a Nigerian offshore oilfield, with the capacity of 200,000 barrels a day, after an attack by militants.

The benchmark futures contract, New York's light sweet crude for July delivery, was 56 cents lower at $ 131.37 a barrel. Yesterday it slid $ 4.75 to close at $ 131.93 on the New York Mercantile Exchange.

Brent North Sea crude for August delivery eased 13 cents to $ 131.87 after dropping 4.44 dollars to settle at $ 132 in London.

China will raise petrol and diesel prices by more than 16 per cent from Friday to reduce the gap with soaring international oil prices, the official Xinhua news agency reported.

Prices were raised to ensure supplies by reducing the gap between soaring international crude prices and state-set domestic oil prices, the commission said.

Analysts have said China's thirst for oil to power its economic growth has been a major factor behind soaring world oil prices.

Global finance officials fear the runaway oil price, which surged to almost $ 140 on Monday, poses a threat to world economic growth as higher inflation leads central banks to raise interest rates.

Saudi Arabia had not been expected to announce a production increase until a high-level meeting between producers and consumer nations Sunday in Jeddah to discuss soaring prices.

The increase was announced on the website of Saudi Arabia's embassy in London.