Oil eases from 2 year high after Chinese interest rate hike


Oil eased from two-year highs on Monday as uncertainty over Chinese fuel demand growth following a Christmas Day interest rate hike overshadowed a cold snap in the US Northeast.

US crude for February fell 20 cents to USD 91.31 a barrel by 0247 GMT, after hitting a 26 month high of USD 91.63 the previous session. ICE Brent crude rose 31 cents to USD 94.08.

China’s central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.
“China’s interest rate hike is having some impact on the oil markets… because of concerns over how the tightening of monetary policy will impact demand growth,” said Serene Lim, an oil analyst at ANZ.
When China last raised interest rates in mid-October, oil tumbled 4%. Prices quickly recovered and have since rallied by around 15% on abnormally cold weather in the northern hemisphere and an unexpected surge in fuel demand.
Oil prices also came under pressure from the restarting of a major US gasoline refinery.
The gasoline-making fluid catalytic cracker at Hovensa LLC’s 500,000-bpd Virgin Islands refinery resumed operations on Friday after an over two-week unplanned outage.
The unplanned outage contributed to extended tightness in the New York harbour gasoline market that had helped drive oil prices higher.
US gasoline futures eased 0.79 cents to USD 2.4347 a gallon.
Oil’s decline was limited by the first widespread blizzard of the season in the northeastern United States, the world’s top heating oil market.
An unusually cold winter in the world’s largest oil user has contributed to a huge depletion of crude stockpiles, which have fallen at the fastest pace in more than a decade.
Oil’s climb has sparked inflationary worries, not only in China, but also India, South Korea and other major fuel-importing countries.
However, Kuwait’s oil minister said the global economy can withstand an oil price of USD 100 a barrel, while other exporters indicated OPEC may decide against increasing output through 2011 as the market was well supplied.
Qatar’s Minister Abdullah al-Attiyah said he did not expect OPEC to increase production in 2011. OPEC’s next scheduled meeting is in June.
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This post was submitted by Mudit Agrawal.

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