Oil prices hold above 142 dollars ahead of US energy report

Oil prices breached 142 dollars per barrel again on Wednesday, nearing recent record heights, as traders awaited the latest weekly snapshot on energy stockpiles in the United States.

New York's main oil contract, light sweet crude for August delivery, jumped 1.06 dollars to 142.03 dollars a barrel in early European trade.

Brent North Sea oil for August delivery climbed 1.34 dollars to 142.01 dollars a barrel.

Prices rocketed to record highs on Monday on the back of tensions over oil producers Iran and Nigeria, and as the dollar remained weak against other major currencies, traders said.

London Brent oil scored an all-time high of 143.91 dollars and New York crude enjoyed a life-time peak of 143.67.

Concerns over geopolitical tension in the Middle East, the struggling US dollar and unrest in Nigeria continued to drive the market, dealers said.

"They are talking about the usual stuff like the weak dollar, Iran and Nigeria," said Clarence Chu, a trader with Hudson Capital Group, a New York-based energy trading house.

"I would say people are still leaning towards the bullish side but they are looking for new news."

He added that the market would seek fresh direction from the US Department of Energy's oil inventories report that was due for publication later Wednesday.

The weekly US update is crucial for the market because the United States is the world's biggest energy consuming nation, followed by number two China.

A weak US currency, meanwhile, makes dollar-denominated raw materials like oil cheaper for buyers using stronger currencies, and therefore tends to stimulate demand.

Microsoft seeks partners for new bid for Yahoo: WSJ

Microsoft is considering a new attempt to buy part of Yahoo in a deal with other media companies that would likely see a break-up of the Internet firm, the Wall Street Journal reported Wednesday.

Microsoft has approached Time Warner and News Corp, among other media companies, to assess their interest in different parts of Yahoo, according to sources close to the discussions quoted by the newspaper.

The software giant has in the past suggested an arrangement under which it would acquire Yahoo's search engine business and another partner would join forces with what was left of the Internet firm, the Journal reports. According to the same sources, Microsoft Chief Executive Steve Ballmer asked Yahoo president Roy Bostock for a meeting to discuss a new idea involving other partners. The meeting, set for Monday, was subsequently cancelled by Microsoft.

Microsoft has ruled out making another bid for the whole of Yahoo, after it withdrew a nearly 48-billion-dollar offer in May, and Yahoo announced June 12 that discussions with the software giant on a tie-up had ended.

Yahoo has since launched several moves to persuade investors that it made the right decision, including a new advertising deal with rival Google.

However, the market appears unconvinced. Yahoo shares have dropped 28 percent since February 1, the day that the Microsoft offer was announced.

US authorities probe UBS over tax

US authorities have stepped up a probe into allegations that offshore accounts were set up at Swiss bank UBS to help wealthy clients avoid tax.

The Justice Department is seeking court approval for the Internal Revenue Service (IRS) to issue a civil summons against UBS to obtain key information.

A former UBS banker admitted last month to conspiring to help US clients avoid paying tax.

UBS said it took the matter "very seriously" and was co-operating fully.

'Diligence'

UBS said it was "aware" of the summons request, made to the Federal District Court in the Southern District of Florida.

"UBS takes this matter very seriously and is working diligently with both Swiss and US government authorities, consistent with Swiss law and the legal frameworks for intergovernmental co-operation and assistance," it said in a statement.

Swiss officials held talks with their US counterparts about the allegations last week.

This followed the admission by Bradley Birkenfeld, a former director of UBS private banking division, that he helped US clients avoid paying more than $7m in tax by hiding more $200m in an elaborate web of fraud.

According to the Justice Department, Mr Birkenfeld claimed more than $20bn was sitting in "undeclared" accounts at the Swiss bank controlled by US taxpayers.

Media reports have suggested that up to 20,000 US citizens may be involved.

The IRS said its probe would enable it to "detect wealthy individuals who don't pay their taxes as well as provide details about how advisers facilitate this abuse".

The Swiss bank's reputation for financial prudence has been recently damaged by the sub-prime crisis which has seen it make losses of more than $37bn.

The firm made an $11bn loss in the first quarter of 2008 and is cutting 5,500 jobs.

Iraq seeking help to develop oil

Iraq has begun the process of opening up its oil industry to foreign investment in an effort to boost output of the country's key income earner.

Iraq is seeking external help to boost output from six key oil fields and has attracted interest from leading US, Asian and European producers.

Oil production is currently at its highest since the 2003 invasion.

But political wrangling has so far prevented agreement over who should agree deals and how income is shared.

Political problems

Iraq has reserves of about 115 billion barrels, the world's third largest, and the development of its oil facilities is essential to help to fund the country's long-term reconstruction.

But huge investment is needed to modernise its infrastructure and Iraq's Parliament has so far failed to agree a legal basis for who should agree contracts and how the country's oil should be shared among different groups.

The authorities in Baghdad have long been at odds over the issue with the semi-autonomous Kurdistan regional government in the north of the country.

Production currently totals 2.5 million barrels a day and Iraq hopes to increase output to 2.9 million barrels by the end of 2009.

Iraq confirmed on Monday that it was seeking foreign investment to develop six of its most important oil fields - Rumaila, Kirkuk, Zubair, West Qurna, Bai Hassan and Maysan.

It has identified 35 foreign firms which are qualified to tender for the contracts, to be awarded next summer.

Amid concerns about foreign firms reaping huge financial rewards, Baghdad said the successful firms would have to have an Iraqi partner and give 25% of the value of contracts to locally owned firms.

Significance

The BBC's Nicholas Witchell in Baghdad said the move was highly significant since it paved the way for large foreign firms to re-enter a market they have been effectively barred from since Saddam Hussein nationalised Iraq's main oil company in 1972.

"It is not possible for Iraq, which has large oil reserves, to stay at the current level of production," said oil minister Hussain al-Shahristani.

"Iraq should be the second or third source of oil exportation."

Iraq's courting of foreign investment is at an early stage but has already attracted controversy due to claims that some contracts might be awarded without competitive bids.

Reports suggested that officials were hoping to announce short-term service agreements - an interim measure pending political agreement over a national oil law - with Exxon Mobil, Shell, Total and BP on Monday.

The AFP news agency said Iraqi officials were unwilling to share revenue from oil sales with the firms, as reportedly sought by them, preferring instead to pay them consultancy fees.

However, negotiations over contract terms are believed to be continuing.

The reduction in violence in much of the country over the past year has helped the oil sector achieve greater stability.

On Saturday, Iraq announced it was setting up a third state-owned oil business to expand production from the Maysan region in the south east of the country.

With oil prices at record levels and, according to many experts, set to rise further, the prospect of increased output from Iraq will provide some comfort amid growing worries about whether global supplies can meet long-term demand for oil.

Officials hope the presence of multinational oil firms in Iraq will stimulate more foreign investment in Iraq, our correspondent added.

Tesco to end trade with Zimbabwe

Supermarket chain Tesco has announced it will stop sourcing products from Zimbabwe while "the political crisis persists" there.

The retail giant buys about £1m ($1.9m) worth of goods a year, including vegetables, from Zimbabwe.

Tesco said it was looking for other ways to support workers there.

The move comes a day after a Foreign Office minister urged firms trading with Zimbabwe to "look carefully" at their investments.

The international community has expressed concern at the presidential election re-run, which saw Robert Mugabe claim victory as the sole candidate after opposition leader Morgan Tsvangirai withdrew citing pre-poll violence.

The UN has urged African leaders to try to negotiate a solution to the Zimbabwe's crisis.

Foreign Office Minister Lord Malloch Brown told UK firms that they would find it harder to operate there as sanctions tightened.

'Continued support'

Tesco said it had been "a difficult decision" to end its trade with Zimbabwe.

"We cannot ignore the escalating political crisis in Zimbabwe, and the growing consensus in the international community - including from UK politicians on all sides - that further action must be taken to maximise the pressure for change," the company said in a statement.

It added that it was urgently seeking to ensure workers who supplied the retailer and their families were affected as little as possible.

"We cannot continue to support them through trade, but are urgently finding ways to support them by other means," Tesco said.

The retailer had used its concern for Zimbabwean workers as a reason for maintaining its commercial ties with the troubled African nation.

Last week, it said it would be "irresponsible" to withdraw from the country.

Former Africa minister, Peter Hain MP, welcomed Tesco's decision.

"I hope it will give a lead to other British and global companies to freeze or suspend ties with Zimbabwe under Mugabe's tyranny," Mr Hain said.

"This is a decisive time when everybody and every institution in a position to take a stand should do so."

Rival retailers Waitrose and Sainsbury's both buy fish from Zimbabwe.

Waitrose said it supported international efforts to restore democracy and to help the Zimbabwean population.

"We believe our limited relationships with two Zimbabwean suppliers actually enhances these efforts rather than undermining them," Waitrose said.

"In addition, withdrawing our small amount of trade would greatly affect the workers and their extended families."

Yen wobbles after drop in business confidence

The dollar was slightly higher against the yen in Asian trade on Tuesday after a sharp fall in Japanese business confidence and continued efforts by Washington to talk up the greenback, dealers said.

The dollar was at 106.35 yen in Tokyo morning trade, compared with 106.13 in New York late on Monday.

The euro slipped to 1.5733 dollars from 1.5745 but edged up to 167.24 yen from 167.15.

Japanese business confidence slumped to the lowest level in almost five years in June, the central bank said in its closely watched Tankan survey, but the figure was slightly better than the market had expected.

The dollar gained support after China asked the US to try to steady the greenback amid a cooling global economy, said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

Premier Wen Jiabao asked Washington to take steps to stabilise the dollar and prevent a further slowdown of the global economy in talks with visiting US Secretary of State Condoleezza Rice on Monday, Chinese state media reported.

US Treasury Secretary Henry Paulson meanwhile reiterated his support for a strong dollar, which he said was "a good thing" for the US economy.

"Every economy is going to have some ups and downs. We are going through a tough period in the US right now," he told Russian radio on Monday.

Markets were looking ahead to the release later in the day of the latest snapshot of the US manufacturing sector from the Institute for Supply Management, ahead of key US jobs data for June due on Thursday.

"We expect the US will jawbone against a much weaker dollar if a sliding stock market and weaker news on the economy continues to trigger unwinding of rate hike expectations," NAB Capital strategists wrote in a note to clients.

"For the Fed (US Federal Reserve) to change its tune on the dollar after suggesting it didn't want to see any further decline less than a month ago would be a significant blow to its credibility," they added.

Markets were waiting for a European Central Bank (ECB) meeting on Thursday when interest rates are expected to rise by 25 basis points to 4.25 percent to try to curb inflation that hit 4.0 percent in the eurozone in June.

But analysts said European officials may also start to be more attentive to slowing growth in the eurozone economies.

"The outlook for European growth remains uncertain and there are areas that are already experiencing economic slowdowns," said Sumitomo's Matsumoto.

Oil prices rise above 141 dollars after Opec comments

Oil prices jumped beyond 141 dollars a barrel on Tuesday after the president of Opec said there was uncertainty surrounding future investment in facilities to boost crude output.

New York's main oil contract, light sweet crude for August delivery, was up 1.40 dollars at 141.40 dollars a barrel at about 0820 GMT.

Brent North Sea oil for August delivery climbed 1.50 dollars to 141.33 dollars a barrel.

On Monday, crude futures had struck record high levels close to 144 dollars, as the US currency remained weak against the euro, traders said.

Brent soared to an all-time high of 143.91 dollars and New York crude to a historic peak of 143.67.

On Tuesday the president of Opec, Chakib Khelil, said the oil producers cartel had concerns about future demand which led to uncertainty investing in capacity to increase production.

"The concern we have is about the security of demand," Khelil, who is also Algeria's energy minister, told an energy conference in Madrid.

He told the World Petroleum Congress that there were "big uncertainties" about making huge investments in infrastructure to increase output from members of the Organization of Petroleum Exporting Countries, which pump about 40 percent of world oil.

Global oil prices have doubled in the past year and have risen by almost 50 percent since the start of 2008, when they breached 100 dollars for the first time, triggering fears over inflation and slower economic growth.

Consumer countries blame record prices on tight supplies amid strong demand and unrest in producer countries such as Iran, Iraq and Nigeria. In particular, they accuse OPEC of not producing enough crude.

The 13-nation cartel, however, insists that the weak US currency is at fault, as it drives up demand for dollar-denominated oil from foreign buyers.