Asian states prone to oil price rise

Asian states prone to oil price rise

SINGAPORE (Reuter): Crude prices in Asia have come crashing
down after spiking to an eight month peak but remain high enough
to leave some Asian economies reeling, oil traders and analysts
said yesterday.

The effect of currency devaluations in net oil importers
Thailand and Philippines has been exacerbated by higher dollar-
based oil prices -- a double hit.

India has just cleared a huge oil subsidy deficit, partly the
result of oil prices hitting five-year highs in 1996, only to see
oil prices rise again.

"It's the last thing they needed," said James Brown, an energy
analyst at Merrill Lynch in Australia.

November North Sea Brent in London jumped $1.13 to $21.61 per
barrel on Friday -- an eight month high and 19 percent above
levels seen in mid-September.

Prices cooled on Monday and the contract was quoted around
$20.57 in Singapore on Tuesday at 0700 GMT, more than $1 lower
than Friday's peak but still 14 percent above mid-September
prices.

The New York Mercantile Exchange (NYMEX) market told a similar
story. On Tuesday the NYMEX November contract traded in Asia at
$21.91 per barrel, below the eight-month high of $23.15, but 13
percent higher than mid September levels.

Prices rose with heightened tension in the Middle East -- home
to 65 percent of world oil reserves -- as Iranian warplanes hit
opposition groups in the United Nations no-fly zone over Iraqi
territory, drawing a warning from the United States.

The United States ordered an aircraft carrier to skip a port
call and sail straight to the Gulf.

U.N. weapons inspectors have reported interference from Iraq
in carrying out inspections, raising the prospect of further
sanctions against Baghdad, already under a U.N. world trade
embargo for its invasion of Kuwait in 1990.

For some Asian economies the price spike has been a nasty
shock to economies already suffering from massive currency woes.
Against the dollar, the Philippines peso has fallen 26 percent,
the Thai baht 28 percent, Indonesian rupiah 34 percent and
Malaysian ringgit 23 percent since July when the turmoil began.

The crude price rise has added to the damage for Thailand and
the Philippines, who are net importers of crude. But Indonesia
and Malaysia are shielded because they are net exporters.

"It's a huge problem for refineries in the Philippines and
Thailand. They are under enormous political pressure already to
minimize price increases," Brown said.

Adding to the squeeze on the Philippines, the country's
Supreme Court on Tuesday ordered refineries to stop fuel price
rises for at least 30 days because of a question over the
legality of deregulation.

India could start to see increased pressure on its oil
subsidies. The account deficit ballooned to 190 billion rupees
($5.2 billion) in September before the government finally decided
to wipe the slate clean through a bond issue.

"They have got the oil pool back into balance after issuing
oil bonds and then suddenly the oil prices go up again," Brown
said.

But oil traders said the firm price was likely to be short
lived, which would ease the pain for the Asian economies.