Oil prices diverge after China hikes rates

5th April 2011, Comments 0 comments

Oil prices diverged Tuesday, striking 2.5-year highs in London, but falling in New York after interest rate hikes by China sparked concern about slowing demand from the world's powerhouse economy.

Brent North Sea crude for delivery in May hit $122.89 a barrel -- the highest level since August 2008. It later stood at $121.97 a barrel, up 91 cents compared with Monday's close.

New York's main contract, light sweet crude for May, slipped 35 cents to $108.12.

China said Tuesday it would raise one-year deposit and lending rates by 25 basis points in its latest effort to curb rampant lending and bring inflation under control.

The People's Bank of China said the interest rate hikes -- the fourth since late last year -- would take effect Wednesday. The latest move takes the one-year deposit and lending rates to 3.25 percent and 6.31 percent.

"A rate hike was to be expected at some point," noted VTB Capital analyst Andrey Kryuchenkov, who added that the news was weighing on sentiment.

Investors though remained jittery over the political situation in the oil-producing Middle East and North Africa region where popular uprisings have already toppled the leaders of Tunisia and Egypt, lending support to prices.

Libyan rebels are still fighting to depose veteran leader Moamer Kadhafi with the help of air strikes by Western powers.

A key crude exporting nation in the Middle East and North Africa region, Libya has seen its output slashed since rebels began an uprising against Kadhafi's rule.

Libyan rebels were set Tuesday to begin exporting oil for the first time since mid-March after a tanker capable of holding $100 million worth of crude docked at an eastern port.

The Liberian-flagged tanker "has docked in Tobruk," Michelle Bockmann, markets editor of shipping news and data provider Lloyd's List, told AFP in London. "The boat is expected to be loaded on April 6."

Earlier, Bockman said the ship was "a Suezmax tanker and it's able to load one million barrels, or about 130,000 tonnes of oil. So it's over 100 million dollars' (70.5 million euros) worth of crude."

The rebels would neither confirm nor deny reports the ship was due on Tuesday, calling it a matter of "national security".

Libya was producing 1.69 million barrels a day before the unrest but this had ground to a halt in the ensuing violence.


© 2011 AFP

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