Oil prices bounce back in wake of blasts

Oil prices have recovered after the central London bomb blasts triggered heavy trading losses.

09:44 08 July 2005

Oil prices have recovered after the central London bomb blasts triggered heavy trading losses.

US light sweet crude recovered from a low of $57.20 a barrel, rising to $60.73, down 55 cents on the day.

Meanwhile, in London, Brent crude fell to a session low of $55.55, before recovering to $59.28, down 57 cents.

Dealers explained that the initial panic sell-off was because many feared another September 11-style economic slowdown as a result of the blasts.

"The market is interpreting this as a re-acceleration in al-Qaeda activity which could lead to global economic slowdown," commented Deborah White at SG Commodities.

Refco oil analyst Marshall Steeves added "there are concerns that terrorism could impinge on demand" by hurting the fuel-dependent airline industry.

Just before news came through of the London blasts, crude hit a new record high of $62.10.

Many commentators feel the impact of the attacks on the markets is likely to be short-lived.

"It is not 9/11 in its devastation or its impact on global demand," explained the senior vice president at Revco Neumann Bearcat.

The rebound in crude prices was helped by hurricanes approaching the Gulf of Mexico, putting a large number of production and refining facilities at risk.

Tropical storm Cindy caused a cut in power supplies and meant energy companies were forced to shut in about 190,000 barrels a day of output, according to the US government.

Last September's hurricane Ivan caused the Gulf to lose out on 45 million barrels of oil output and lifted oil prices to over $50 a barrel for the first time.