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Oil prices rise in Asia but China, Greece cap gains

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Oil prices rose in Asia Thursday but remain subdued by concerns about the impact on demand from the stock market rout in China and Greece's debt crisis, analysts said.

[SINGAPORE] Oil prices rose in Asia Thursday but remain subdued by concerns about the impact on demand from the stock market rout in China and Greece's debt crisis, analysts said.

Robust commercial crude inventories in the United States added to the pressure in the face of a supply glut, they said.

US benchmark West Texas Intermediate for August delivery was up 52 cents at US$52.17 and Brent crude for August rose 57 cents to US$57.62 a barrel in late-morning trade following recent sharp losses.

"Rising uncertainties from the Greek debt bailout and China's stock market turmoil put global demand at risk," said Sanjeev Gupta, who heads the Asia-Pacific Oil and Gas practice at professional services organisation EY.

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"Commodity prices fell sharply this week with crude prices suffering their largest sell-off in five months, slumping more than 8.0 per cent." Chinese stocks have taken a severe beating after government measures failed to staunch the bloodletting that has wiped out around a third of China's main share market in under a month.

Shanghai stocks traded wildly on Thursday morning, as the government beefed up the measures to arrest the stock market slump in the world's top energy consumer.

"A stock market bust can... leave a lot of people out of pocket and that could dampen domestic spending, which has already been waning," said Jasper Lawler, market analyst at CMC Markets.

"Also, smaller market capitalisations will mean Chinese businesses cannot borrow as much for expansion, limiting employment opportunities and further curtailing spending," he said in a market commentary.

In Europe, Greece's future in the eurozone is at risk after European leaders gave the debt-stricken nation a final deadline of Sunday to reach a bailout reform deal.

Traders were also keeping a close eye on intense negotiations in Vienna between the west and Iran on curbing Tehran's nuclear ambitions, said Mr Gupta, the EY analyst.

An agreement with Iran would see the West lift punishing economic sanctions that have restricted the country's oil exports.

"An outflow of Iranian oil could put downside pressure on crude prices in a global market that is already oversaturated by a glut of oversupply," Mr Gupta said.

AFP

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