Fears that militant attacks will destabilise Saudi Arabia drove crude prices to record highs on Wednesday in their biggest jump in more than a year, shoving Asian stock markets lower. The dollar gained on upbeat U.S. economic data, as NYMEX crude oil futures hit a record high of $42.45 a barrel in Asian trading. By 0610 GMT the futures had retreated to $42.09 a barrel but were still up nearly six percent, or more than $2 a barrel, since a weekend attack by Islamic militants that killed 22 people in Saudi Arabia, the world's biggest oil exporter. "Even if they are not capable of doing serious damage to oil infrastructure, political instability and the threat to the ruling family is of real concern and promises to haunt the oil market for some time to come," said OPEC analyst Geoff Pyne. Traders were already nervous that escalating violence in the Middle East might lead to sabotage of oil infrastructure in the region, which pumps more than a quarter of world supplies. Japan's Nikkei average <.N225> fell 0.5 percent to close at 11,242.34, led lower by exporters and banks <.IBNKS.T>. Sharp Corp <6753.T> sank 2.8 percent.
Japan, South Korea and Taiwan are almost entirely dependent on imported oil. Stocks in South Korea <.KS11> and Taiwan <.TWII> sank 1.4 percent and 1.9 percent respectively. Hong Kong's Hang Seng Index <.HSI> gained 0.7 percent, supported by beer maker Harbin Brewery <0249.HK>, which jumped more than 16 percent after the world's top brewer, Anheuser-Busch launched a $720 million bid for the company. Financial bookmakers in London expected Britains's FTSE 100 <.FTSE> to open up to 16 points higher, with Germany's DAX index <.GDAXI> seen adding as many as 25 points and France's CAC-40 <.FCHI> set to start with a gain of up to 21 points. The dollar strengthened against the yen and the euro on stronger-than-expected U.S. manufacturing and construction data, but analysts warned against betting on an all-out rally. The dollar bought 110.60 yen after hitting a session high 110.02 yen in New York, where it settled at 109.78 yen. A euro cost $1.2277, up from $1.2207.
FEAR FACTOR
OPEC producers said an expected deal this week to hoist crude output limits may fail to quell the fears of rising world oil prices. Ministers from the Organisation of the Petroleum Exporting Countries, meeting in Beirut on Thursday, said they were running short of ammunition to force down prices. "A supply increase will not help lower prices," said Iranian Oil Minister Bijan Zanganeh. "The fear factor, we cannot control it, we wish we could, but we will do something," Qatari Oil Minister Abdullah al-Attiyah told . OPEC is considering lifting supply quotas by 2 million to 2.5 million barrels daily, a rise of 8 to 11 percent. Kuwait's oil minister said on Tuesday his country was increasing oil installation security and was coordinating with fellow Gulf producers to protect against attacks. Safe-haven gold rose in early Europe, supported by high oil prices, after being pressured in lower in Asia by the dollar's strength. Spot gold was at $395.30 an ounce versus $394.30 in late New York.
U.S. DATA
Traders looked forward to the Friday U.S. payrolls report, which is the last big piece of economic news before the Federal Reserve meets on June 29 and 30. The market expects the Fed to begin raising interest rates from their 46-year low of 1 percent, but surging oil prices, which some fear could derail the U.S. and global economies, have heightened debate about the timing of a move. "The oil price is the main macro theme, which is raising concerns about the U.S. recovery prospects," said Ian Stannard, currency strategist at BNP Paribas. U.S. stocks gained on Tuesday as investors focused on strong economic data and put aside worries over crude oil prices. The Dow Jones industrial average <.DJI> closed up 0.14 percent. The technology-focused Nasdaq Composite Index <.IXIC> rose 0.2 percent.///