Surging oil price drags index down at midday

By Lydia Chen  |   2008-6-6  |     ONLINE EDITION

SHANGHAI'S key stock index declined in the morning session today amid concerns rising crude-oil prices will raise fuel costs and hurt earnings at refiners and airlines.

The Shanghai Composite Index lost 0.17 percent, or 5.74 points, to 3,345.90 at 11:30am. The index is comprised of yuan-denominated A shares and hard-currency B shares.

Losers in the Shanghai market outnumbered gainers 499 to 284 while 23 were unchanged.

The Shenzhen Composite Index, which tracks the smaller domestic stock exchange, was up 0.14 percent, or 1.44 points, to 1,013.06.

Air China Ltd, the country's largest international carrier, and China Petroleum & Chemical Corp, the nation's biggest refiner, declined after oil posted a record US$6 gain on the weak US dollar yesterday on overseas markets.

Air China, based in Beijing, fell 1.84 percent to 12.28 yuan (US$1.77). Shanghai-based China Eastern Airlines Corp, the country's third largest carrier by fleet size, declined 2.99 percent to 10.05 yuan.

Jet fuel accounted for about 40 percent of Chinese airlines' costs in 2007, according to annual reports.

Oil surged US$6 to over US$128 a barrel yesterday in the largest outright gain on record.

US crude oil traded up US$6.08 to US$128.38 a barrel after settling up US$5.49 earlier at 127.79, erasing two days of sharp losses that had been triggered by worries high prices were starting to eat into global demand.

London Brent crude futures settled US$5.44 higher at US$127.54 a barrel, before trading up to US$127.83 in post-settlement activity.

China Petroleum, known as Sinopec, dropped 1.88 percent to 13.55 yuan this morning. PetroChina Co, China's biggest oil producer, lost 1.32 percent to 17.26 yuan.

A PetroChina Co pipeline that carries 70 percent of Sichuan Province's oil-product supplies is at risk of damage from a quake lake that could burst anytime, PetroChina's parent China National Petroleum Corp said in a statement on its Website today.