Oil s 10-day rise snapped after 15-month high

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Commodities - International Oil Report

NEW YORK (January 08 2010): Oil fell from 15-month highs to below $83 a barrel on Thursday on the stronger dollar and as signs of tighter monetary policy in China sparked concerns about demand in the world s second largest energy consumer. China s central bank surprised markets by raising the interest rate in a three-month bill auction, which the markets took as a signal of policy tightening, putting pressure on commodities and clipping 10 straight days of gains for oil.

China s rapidly expanding economy and its burgeoning thirst for oil has been seen as one of the main reasons crude prices have more than doubled in the past 12 months, despite the lingering impact of the economic crisis. US crude for February delivery fell 52 cents to settle at $82.66 a barrel, off Wednesday s 15-month high of $83.52. London Brent crude fell 38 cents to settle at $81.51 a barrel.

Crude oil edged lower on speculation that China s move to slow bank lending may reduce commodity demand in the country, Addison Armstrong, analyst at Tradition Energy in Stamford, Connecticut, said in a note. Crude had shrugged off news of higher US oil inventories on Wednesday to post its 10th straight session of gains, extending a near $11 rally on expectations freezing temperatures across much of the United States would eventually cut into bulging stocks.

Arctic winds have pushed down into the Northern Hemisphere, freezing Europe and parts of Asia, and boosted demand for heating in the United States some 21 percent above normal. European energy demand has also surged, especially in Britain and France, while heavy snow and record low temperatures in China prompted cities across eastern and central parts of the country to begin rationing power.

Further pressure on crude came as the US dollar rose against the euro and yen, underpinned by weak German and eurozone data as well as by comments from Japan s new finance minister that he wanted the yen to weaken more. Over the past year, oil prices have frequently weakened as the dollar firmed, at times signalling a flight to safer havens by investors. Oil markets have also been looking to wider economic data for positive signs that could boost demand.

The number of US workers filing new jobless claims edged up by a slim 1,000 last week and a gauge of underlying labour market trends hit a nearly 16-month low, evidence the job market continues to heal. Monthly non-farm payrolls data on Friday will give a further indication of the pace of recovery in the world s top energy consumer.

Thursday s decline in oil prices was somewhat offset by rising investment funds into crude and other commodity markets on expectations the asset class would extend last year s strong performance as the global economy rebounds. The market has also been watching continuing talks between Belarus and Russia over the supply of Russian oil for 2010. Russia briefly cut oil supplies to Belarussian refineries in a dispute over pricing that raised the prospect of supply disruptions for European Union customers, helping to lift oil prices this week.

Courtesy : Business Recorder


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