Oil prices fall further on China inflation move

14th January 2011, Comments 0 comments

Oil prices extended losses on Friday as China, the world's biggest energy user, took fresh steps to curb its high inflation, analysts said.

Brent North Sea crude for delivery in February dipped nine cents to $97.97 a barrel in London trade.

New York's main contract, light sweet crude for February, slid $1.07 to $90.33 a barrel.

"Certainly this morning's move by the Chinese central bank to raise bank reserve requirement ratios by 50 basis points has caused a slight softening in commodity prices and seen crude oil slip back," said Michael Hewson, an analyst at CMC Markets.

Traders reacted to China's announcement that its central bank planned to raise the amount of money that lenders are required to keep in reserve as the Asian nation seeks to rein in its high inflation.

The bank reserve requirement ratio would be raised by 50 basis points beginning on January 20, the People's Bank of China said in a statement.

Ever fearful of inflation's potential to spark social unrest, Beijing has been pulling on a variety of levers to rein in consumer prices and calm growing anxiety about soaring food costs and property values.

In December, the central bank hiked interest rates for the second time in less than three months. It raised the reserve requirement ratio six times in 2010, a move that obliges lenders to keep more money in reserve, effectively limiting the amount of funds they can lend and thereby curbing the liquidity blamed for helping fuel inflation.

Oil prices had meanwhile already fallen on Thursday following weak US jobs data and the reopening of a pipeline in Alaska, traders said.

They had struck a two-year peak near 99 dollars in London on Wednesday, boosted by plunging American crude reserves, and as the key Trans-Alaskan pipeline remained shut following a leak that struck over the weekend.


© 2011 AFP

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