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. Last Updated: 07/27/2016

Pankin Denies Secret Oil Talks, Crude Nears $71

Russia has not considered replacing the dollar as the currency used to buy and sell oil, a top Finance Ministry official said Tuesday.

"The Finance Ministry has not discussed this subject," said Deputy Finance Minister Dmitry Pankin.

Prices for WTI crude rose toward $71 per barrel Tuesday, helped by a fall in the dollar after Britain's Independent newspaper report that Gulf Arab states were in secret talks to replace the greenback with a basket of currencies in oil trading.

Quoting unidentified sources, including Gulf Arab and Chinese banking sources, the newspaper said Gulf Arab states were in secret talks with Russia, China, Japan and France "to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf."

Saudi Arabia's Central Bank chief said Tuesday that the report was "absolutely incorrect," while Algeria's finance minister said there was no need for a new currency in oil trade.

Traders have been looking to macroeconomic data and equities markets for signs of a potential end of the recession that could boost consumption and draw down high oil inventories. Analysts said ending the use of the dollar as the currency used to settle oil trades between countries would be an easy task, but a move to replace the currency in which oil is priced would require a massive effort.

"First they will need to select a basket of currencies and issues surrounding that are: which are the currencies to be included in the basket and what ratios to use?" said Victor Shum, an energy analyst at Purvin & Gertz Consultancy.

"It's already a big hurdle just to move oil from one currency to another, let alone a basket of currencies. If there was already a significant proportion of global oil trade being priced in non-U.S. dollar now, than perhaps there would be more pressure to price crude in another currency. But we're still far from that."

The American Petroleum Institute was to release its inventory report Tuesday, while the U.S. Energy Information Administration will issue its own supply data on Wednesday.

(Reuters, MT)