* U.S. crude up near 2 percent, hits highest since May 6
* China yuan flexibility seen prompting greater oil demand
* Stock markets climb after currency move, helps lift oil
* Coming up: Federal Reserve 2-day meeting starts Tuesday
(Recasts, updates prices, market activity, moves dateline from
previous LONDON)
By Robert Gibbons
NEW YORK, June 21 (Reuters) - Crude oil prices jumped to a
6-1/2-week high on Monday, after China's move to make its
currency more flexible raised expectations of stronger demand
from the world's second largest energy consumer.
At 11:56 a.m. EDT (1556 GMT), U.S. crude for July delivery
<CLc1> was up $1.37, or 1.78 percent, at $78.55 a barrel,
having reached $78.92, the highest since $80.39 was struck on
May 6.
August ICE Brent <LCOc1> rose $1.21 to $79.43 a barrel.
China's yuan on Monday posted its biggest daily surge since
its July 2005 landmark revaluation, sending a signal ahead of
this weekend's G20 summit that Beijing is keeping its word and
allowing greater currency flexibility. []
The yuan closed at 6.7976 versus the dollar, up 0.42
percent from Friday's close of 6.8262. The 6.7958 intraday peak
was an all-time high since the revaluation. []
Analysts said a stronger yuan against the U.S. dollar might
make Chinese imports of dollar-denominated oil less expensive,
boosting demand consumption. []
"The policy shift in China to allow the yuan to strengthen
ought to stimulate domestic oil demand. That's the underlying
reason for the marker going higher," said Christopher Bellew,
London-based oil broker at Bache Commodities.
But the longer-term impact on oil and other commodity
prices may be small, according to some analysts, since China
will not let the yuan rise sufficiently high to make much
difference to its companies' spending power on commodity
imports [].
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Take a Look - China vows yuan flexibility []
Factbox on key China commodity imports []
John Kemp column on yuan pledge: []
For a graphic on China's spending on commodities, click:
http://graphics.thomsonreuters.com/10/CN_CMDBLL0610.gif ^
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Copper and metals such as platinum and palladium were also
up strongly on Monday in response to the news about the yuan,
since China is a large importer of these commodities.
Reuters' analysis of official Chinese figures on Monday
showed China's oil demand fell in May from April, though it
remained up 9.4 per cent from year ago. [].
U.S. crude prices have recovered about 21 percent from the
May 20 $64.24 intraday low, but remain more than $8 below the
2010 peak of $87.15 struck on May 3.
The technical picture took on a renewed bullish cast, as
NYMEX crude stretched its gain after opening above the 50-day
moving average to quickly find resistance at the 100-day moving
average.
"We have broken above the range around $75 and we would
expect prices to now rise above $80," said Amrita Sen, analyst
at Barclays Capital in London.
European and U.S. stock markets <> <.SPX> rose on
Monday, mirroring Asian equity gains after China's currency
move boosted confidence in the global economy.
Also a focus this week for global markets is the U.S.
Federal Reserve Federal Open Market Committee two-day meeting
starting on Tuesday. Markets await confirmation that low
interest rates and other economic stimulus measures will remain
in place.
In the background, but supportive to crude prices, is the
dispute over Iran's nuclear program. Iran has barred two U.N.
nuclear inspectors, adding to tension after Tehran was recently
hit by new sanctions over its nuclear program. []
Russia cut gas supplies to Belarus by 15 percent on Monday,
pressing its neighbor to pay a $192 million debt and raising
fears of disruptions in deliveries to Europe. []
(Additional reporting by Joe Brock and David Turner in London,
Alejandro Barbajosa in Singapore; editing by Alden Bentley)
