UPDATE 1-Oil climbs 1.4 pct after China says yuan to be flexible

                                
 * Re-valuation effect on demand may outweigh lower exports
                                
 * Oil pares gains after yuan mid-point left unchanged
                                
 * Coming Up: China final commodity May trade data
                                
 * For a technical view, click: [ID:nSGE65K00L]
                                
 By Alejandro Barbajosa
                                
 SINGAPORE, June 21 (Reuters) - Oil prices rose 1.4 percent
on Monday, the highest since mid May, as China vowed at the
weekend to allow a flexible yuan exchange rate, raising
expectations of higher crude imports by the world's No. 2 oil
user.
                                
 U.S. crude for July delivery <CLc1> rose as much as $1.09
to $78.27, the highest since May 10. It temporarily pared gains
after China on Monday set the yuan mid-point unchanged from
Friday, and was up 87 cents at $78.05 at 0139 GMT.
[ID:nECB000552]
                                
 China announced on Saturday that it would resume making the
yuan more flexible, signalling that it was ready to break a
23-month-old peg to the dollar that had come under intense
international criticism. [ID:nTOE65J004]
                                
 But in a lengthy statement about how reform would proceed,
the central bank explicitly ruled out a one-off revaluation,
repeatedly said there was no basis for any big appreciation and
added that the currency's value was not far off its fair level.
                                
 A flexible yuan could potentially strengthen against the
dollar and render Chinese imports of dollar-denominated oil
cheaper, fanning energy consumption.
                                
 "China is important for the global oil market and an
appreciating yuan is gong to help fuel its imports," said Ben
Westmore, a commodities analyst at National Australia Bank.
                                
 "But you are going to struggle to see oil break to the
upside without a great deal of clarity about the euro situation
yet," Westmore said, adding prices were unlikely to surpass
their early-May 19-month peak above $87 before the end of the
year.
                                
 Oil has recovered about 21 percent from a trough below $65
a month ago, but is still $9 lower than the 2010 peak.
                                
 ICE Brent crude for August <LCOc1> rose as much as $1.17 to
$79.39 a barrel on Monday, the highest price since May 14, and
was up 90 cents at $79.12.
                                
 Global stocks, commodity-linked currencies and other
higher-yielding currencies may receive an immediate boost this
week in response to China's decision on the yuan. [MKTS/GLOB]
                                
 Japan's Nikkei average powered to a one-month high on
Monday, but Shanghai's Composite Index opened up a marginal 0.2
percent and S&P futures trimmed gains after the yuan's
mid-point was left unchanged from Friday. [ID:nTOE65K00B]
                                
 Analysts have also said China's move towards a more
flexible yuan was likely to be taken as a vote of confidence in
the global economic recovery's staying power. [ID:nN20171161]
                                
 World stocks gained for a ninth straight day on Friday on
improved risk appetite after a Spanish bond auction eased fears
about sovereign debt in Europe and helped the euro hold near
three-week highs. [MKTS/GLOB]
                                
 In a sign of normalisation, Wall Street's fear gauge, the
Volatility Index <.VIX>, tumbled below 24 on Friday after
setting a 14-month high above 47 in May.
                                
 BP Plc <BP.L> <BP.N> estimates that a worst-case scenario
rate for the Gulf of Mexico oil spill could be about 100,000
barrels of oil per day, according to an internal company
document released on Sunday by a senior U.S. congressional
Democrat. [ID:nN19188555]
 (Editing by Ed Lane)