Saudi Official Says Pipeline Explosion Report Is False

Oil surged nearly 5 percent on Thursday to its highest level since crude's record run in 2008 after a late report out of Iran of a pipeline fire in top exporter Saudi Arabia.

Iranian media reported an explosion on an unknown oil pipeline in the oil-rich Eastern Province of Saudi Arabia, although it was not possible to verify the report immediately.

Prices edged off highs after Dow Jones newswires reported a Saudi oil official said the report was untrue, according to CNBC television.

Markets have been on edge this year as threats of a supply disruption due to the West's standoff with Tehran over Iran's nuclear program have added to concerns about actual production losses from South Sudan, Yemen, Syria and the North Sea.

"The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

U.S. light, sweet crude [CLCV1  Loading...      ()   ] settled at $108.84 a barrel, up $1.77, before rising to $110.55 in late activity, the highest since May 2011.

Iran, the world's fifth largest oil producer, has been struggling to sell its crude in the face of tightening U.S. sanctions and an EU embargo that kicks in on July 1. This has threatened to tighten global crude supplies.

However, U.S. Energy Secretary Steven Chu said that global oil producers have enough spare production capacity to make up for a drop in Iranian exports.

Brent crude futures [LCOCV1  Loading...      ()   ] prices topped $128 a barrel in late post-settlement trade, levels not reached since July 2008 when the growing economic crisis sent oil spiraling to record peaks of more than $147 a barrel.

Prices were already up before the pipeline report, lifted by news Israel would test-fire a ballistic interceptor missile, escalating tensions over the crisis that has included tough sanctions against Iran.

International benchmark Brent crude climbed to $128.40 a barrel in post-settlement trade, after settling at $126.20, up $3.54 on the day.

U.S. President Barack Obama said his administration will lay out as "many steps as we can" in coming weeks to unclog bottlenecks in the world's top consumer that are helping to push up the price of gasoline and other fuels, a key issue for consumers as the economy struggles to recovery in an election year.

Data showing U.S. jobless claims fell last week — the latest sign that the labor market recovery was gaining momentum — also helped support prices.

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China Internet Firm Qihoo Says Citron Allegations False

U.S.-listed Chinese online services provider, Qihoo 360, announced a 190 percent jump in revenues for 2011 in an unaudited financial statement released Thursday, but U.S.-based research firm Citron Research alleges in a report posted on its website that there are “gross inconsistencies” in Qihoo’s financials.

Qihoo’s [QIHU  Loading...      ()   ] Chief Financial Officer, Alex Xu, told CNBC that internal investigations conducted in recent weeks have found no wrongdoings and that the company will file its audited financials by the regulatory deadline of April 30.

“In terms of the allegations made by Citron, even though all of them are false and misleading, we take them very seriously. We conducted an internal review organized by (an) audit committee...we concluded that all the allegations are either misleading or totally false,” Xu told CNBC.

Citron, which has raised questions about the credibility of the Internet company’s financials in the past as well, reiterated on Thursday its concerns that Qihoo’s earnings’ report was “grossly misrepresented.”

Andrew Left, Manager at Citron Research, told CNBC the company had inflated revenue generated from advertising, particularly from the text links on its website.

A text link is text that is hyperlinked to a page on another website, in this case to the page of an advertiser.

Qihoo's claims that its annual revenue from text links in excess of $110 million is "impossible," as text links make up one percent or $80 million of all online advertising revenue in China, says Citron.

“I do not believe the growth in their current advertising revenue,” Left said adding that their business model of selling text links was “archaic”.

Citron also says in its report that the Internet company’s average revenue per user (ARPU) from its gaming products is “widely out of scale” with publicly listed competitors.

Qihoo claims ARPU of RMB380 ($60) per month, while similar online games from publicly traded competitors earn less than RMB100 per month, according to the research firm.

Citron, which says in its report that Qihoo has a slim chance of passing an audit or avoiding an investigation by the U.S. Securities and Exchange Commission, is taking a short position on the company.

However, other analysts including Wendy Huang, Senior Media & Internet Analyst at RBS, are upbeat on the prospects for the web firm.

“Few companies can deliver such stellar growth these days. Qihoo this quarter beat the street expectations, beat our estimate by 12 percent from the top line to bottom line, and also operating margins are improving every quarter,” she said.

Huang says Qihoo is an attractive investment because of its huge user base of more than 400 million a month, which is growing and can be monetized by the firm.

“While, Qihoo is not a popular company amongst their industry peers but it is becoming a necessity for most of the Internet users (in China),” she said.

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