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. Equities slid on signs China is preparing to increase the cost of borrowing to curb inflation and the dollar climbed to a six-week high against the euro as Group of 20 leaders hold an emergency meeting amid concern that Europe’s debt crisis is worsening. “For the time being $90 is going to be a very strong resistance level; above that, it’s too expensive,” said Andy Sommer, a senior analyst at EGL AG in Dietikon, Switzerland. “There’s a lot of uncertainty about Chinese monetary policy. If they tighten further, that has implications for the oil market.” Crude for December delivery fell as much as $2.30, or 2.6 percent, to $85.51 a barrel in electronic trading on the New York Mercantile Exchange. It was at $86 at 11:16 a.m. London time. Yesterday, the contract rose to $88.63, the highest price since Oct. 9, 2008. 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 fell $1.52 to $87.58. The MSCI Asia Pacific Index retreated 1.5 percent while Stoxx Europe 600 Index fell as much as 1.8 percent and Standard & Poor’s 500 Index futures slid 1.5 percent. China’s inflation rate rose to the fastest in two years last month, fueling speculation an interest-rate increase is imminent. “People are betting on the Chinese rates and the discussions in the G-20 meeting are responsible for the current heavy selloff,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo. IEA Demand Outlook Oil supplies from outside the Organization of Petroleum Exporting Countries will be higher than previously estimated next year on stronger output from North America and China, the International Energy Agency said. Non-OPEC producers will provide 53.4 million barrels a day in 2011, or 250,000 barrels a day more than the agency’s estimate a month ago. Worldwide crude consumption will increase by 1.2 million barrels a day, or 1.4 percent, in 2011 to 88.5 million barrels a day, the IEA said in a report today. Oil has lost 1 percent this week, paring this year’s gain to about 8 percent. Prices rallied 78 percent in 2009. Price Forecasts 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. 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. OPEC’s compliance with record supply cuts was little changed last month as production increases in six of its member countries offset declines in Iraq, Saudi Arabia and Venezuela, according to the IEA’s report. The 11 members bound by quotas produced 26.72 million barrels a day last month, implying compliance of 55 percent, the Paris-based IEA said today in its monthly report. That’s down from a revised 56 percent for September. Supply from all 12 OPEC nations, including Iraq, fell by 40,000 barrels a day in October to average 29.15 million barrels daily, it said. OPEC said in its monthly report yesterday that compliance with production targets fell last month as countries including Nigeria and Angola pumped more oil. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

Source