Oil prices inch towards $80




Oil prices rallied towards $80 yesterday on expectations that demand in China will rise after the nation’s central bank said it would allow the yuan more “freedom of movement”.



New York’s main futures contract, light sweet crude for delivery in July, also advanced $1.32 to $78.50 a barrel. Brent North Sea crude for August delivery rose $1.32 to $79.54 a barrel in London.
The news also helped push gold to a record high price of $1,265 an ounce in London, with the precious metal also boosted by euro zone debt crisis concerns.Over the weekend, the People’s Bank of China said it would ‘strengthen the flexibility’ of the country’s currency, sparking a massive global stock market rally yesterday. 



Analysts have interpreted the Chinese apex bank’s statement as a sign that Beijing was ready to adjust the dollar peg, which has been in place for two years, and allow the currency to rise.China has effectively pegged the yuan at about 6.8 to the dollar since mid-2008 to prop up exporters during the world financial crisis. But Beijing has come under mounting pressure ahead of next weekend’s Group of 20 summit in Toronto, to allow the currency to strengthen.



The People’s Bank of China left the yuan’s mid-point unchanged yesterday from Friday before trading started, but it later allowed the spot yuan rate to jump to a 21-month high of 6.8154 against the dollar.Final Chinese commodity trade statistics for May, which were due to be published yesterday, were also in focus.Japan’s Nikkei, Shanghai’s Composite Index and Hong Kong shares rose more than two per cent yesterday. S&P futures had trimmed gains with news of the steady yuan mid-point, then rebounded.August ICE Brent rose $1.35 yesterday to $79.57 a barrel yesterday, the highest price since May 14th.



United States of America (USA) crude has recovered about 21 per cent from a trough below $65 a month ago, but is still about $9 lower than the 2010 high.Analysts also said that the oil market has been closely monitoring the weather conditions in the Gulf of Mexico region during the current Atlantic hurricane season. The Gulf of Mexico supplies about 30 per cent of the energy needs of the U.S., the world’s biggest economy.






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