BLBG: Oil Falls From Two-Year High on Speculation China May Raise Interest Rates
Oil declined from a two-year high in New York on speculation China will raise interest rates, damping growth in the world’s biggest energy consumer.
Crude fell for the first time in three days and was set for a weekly drop as Asian equities and U.S. stock-index futures slid on signs China is preparing to increase the cost of borrowing to curb inflation. The dollar climbed to a six-week high against the euro as Group of 20 leaders hold an emergency meeting amid concerns Europe’s debt crisis is worsening.
“People are betting on the Chinese rates and the discussions in the G-20 meeting are responsible for the current heavy sell-off,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo.
Crude for December delivery fell as much as $2.28, or 2.6 percent, to $85.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $85.64 at 4:16 p.m. Singapore time. Yesterday, the contract was unchanged at $87.81, matching the highest settlement since Oct. 9, 2008.
The MSCI Asia Pacific Index retreated 1.4 percent while Standard & Poor’s 500 Index futures slid 1.2 percent. China’s inflation rate rose to the fastest in two years last month, fueling speculation an interest-rate increase is imminent.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, rose for a sixth day. The greenback also gained 0.3 percent against the 16-nation euro. A rising dollar tends to reduce the appeal of raw materials as an inflation hedge.
‘Confidence’
Oil has lost 1.3 percent this week, paring gains this year to about 8 percent. Prices rallied 78 percent in 2009.
“The key issue that’s been around since post the global financial crisis is confidence,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney. “At this point in time there are still plenty of question marks and the market is sensitive. If we start to see any signs of consistent strength coming from the U.S. dollar we’re going to see a bit of correction all around.”
Futures may rise next week after an Energy Department report on Nov. 10 showed U.S. crude and fuel inventories tumbled, according to a Bloomberg News survey. Sixteen of 37 analysts and traders, or 43 percent, forecast crude will climb through Nov. 19. Twelve respondents, or 32 percent, predicted prices will decline and nine estimated there would be little change. Last week, 59 percent said oil would increase.
Brent
Brent crude for December settlement fell as much as $2.16, or 2.4 percent, to $86.65 a barrel on the ICE Futures Europe exchange in London. The contract expires Nov. 15. The more actively traded January futures dropped $1.90 to $87.20.
Crude rose to a two-year high even as stockpiles in the U.S., the biggest consumer, remain 13 percent above the five- year average and members of OPEC, supplier of more than a third of the world’s oil, increase production.
Compliance within the Organization of Petroleum Exporting Countries to production targets fell last month as countries including Nigeria and Angola pumped more oil.
Daily output from the 11 OPEC members bound by quotas, all except Iraq, rose 163,600 barrels a day to 26.89 million barrels a day in October, the group’s Vienna-based secretariat said yesterday in a monthly report. That indicates compliance of 51 percent compared with a revised 55 percent for September.
To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net
