Tuesday 24 April 2018

Oil steadies near 2-year high on demand doubts

Singapore, December 27, 2010

Oil steadied near two-year highs on Monday as uncertainty over Chinese fuel demand growth  following a Christmas Day interest rate hike offset a blizzard  in the US Northeast.

US crude for February nudged three cents lower to  $91.48 a barrel by 0512 GMT, after hitting a 26-month high of  $91.63 the previous session. ICE Brent crude rose 44 cents to $94.21.

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 per cent. Prices quickly recovered and have since  rallied by around 15 per cent on abnormally cold weather in the  northern hemisphere and an unexpected surge in fuel demand.

While markets had expected a rate rise, the timing was a   surprise. Most markets recovered from early losses on   expectations the measures would do little to curb China's   appetite for industrial raw materials, energy, grains and   other agricultural products.

Rising oil prices led China to boost fuel prices by 4  per cent earlier this month, but analysts believe the price  hike was too modest to have a significant impact on demand.

US refinery restarts

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 0.77 cents to $2.4346 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 $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. – Reuters

Tags: China | Oil | Singapore | price | Interest rates | Christmas | Blizzard |


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