Oil prices slip on profit-taking as China hikes rates
Oil prices fell Tuesday after striking 2.5-year highs as traders took profits and China hiked interest rates, sparking concern about slowing demand from the world's powerhouse economy.
Brent North Sea crude for May dipped 72 cents to $120.34 a barrel, after soaring in overnight trade to $121.29, the highest level in more than two and a half years.
New York's main contract, light sweet crude for delivery in May, slid 71 cents to $107.76. On Monday, it hit $108.78, a level last seen in September 2008.
"Oil prices pulled back ... as the high prices prompted profit-taking from traders and investors," said Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.
Prices jumped to two-and-a-half-year highs on Monday due to the continuing unrest in Libya and positive economic data in the United States, which is the world's biggest consumer of oil products.
But the market fell on Tuesday after 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 in the absence of other market drivers.
Investors remain 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.
Libyan rebels are still fighting to depose veteran leader Moamer Kadhafi with the help of air strikes by Western powers.
Reports Tuesday that a tanker is due to pick up the first cargo for 18 days from the rebel-held port of Tobruk in eastern Libya added to the downward pressure on prices.
"There is a tanker which is scheduled to arrive later today at the oil terminal near Tobruk, according to Lloyd's Intelligence checking data," said Michelle Wiese Bockmann, markets editor of Lloyd's List, a shipping news and data provider.
She added: "We have yet to confirm if it has arrived ... The owner of the tanker has yet to comment.
"It's a Suezmax tanker and it's able to load one million barrels of oil, or about 130,000 tonnes of oil. So it's over $100 million (70.5 million euros) worth of crude."
The Liberian-flagged ship was heading to the Marsa el-Hariga terminal, she said.
Libya, a key crude exporting nation in the Middle East and North Africa region, has seen its output slashed since rebels began an uprising against Kadhafi's rule.
Oil-rich Libya was producing 1.69 million barrels a day before the unrest but this had ground to a halt in the ensuing violence.
"If this shipment does go ahead, I think it will send a very strong message that international oil (exporting) is going to resume," added Bockmann.
"It's quite a risky business. The ship owner, I would imagine, is being paid a significant premium to bring that ship there."
© 2011 AFP