Oil erased earlier gains and was headed for its biggest weekly loss in three months following China’s decision to raise banks’ reserve ratios. Futures reversed a 1.1 percent gain after China ordered lenders to set aside larger reserves for the fifth time this year to rein inflation, potentially crimping demand in the world’s fastest-growing major economy and biggest energy user. “The Chinese are fearful of inflation, and that’s causing a bit of risk reduction in the market right now,” said Robert Montefusco, senior broker with Sucden Financial in London. Crude for December delivery fell 16 cents, or 0.2 percent, to $81.69 a barrel on the New York Mercantile Exchange as of 12:53 p.m. London time after rising as high as $82.75. Brent crude for January settlement was at $85.12 a barrel, up 7 cents, after rising to $86.15 a barrel on the ICE Futures Europe exchange in London. The Nymex December future expires today. The more-actively traded January contract was down 26 cents at $82.16 a barrel. January oil contracts are $2.96 a barrel more in London than in New York, almost triple the difference of a week ago. Crude has dropped 3.8 percent this week, the most since the seven days ended Aug. 13, as Ireland grappled with its deficit and China’s Premier Wen Jiabao said the government was drafting measures to counter inflation. “We’ve been worried about two major issues, in Ireland’s debt concern and Chinese rate rises,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney. China Reserve Ratio The People’s Bank of China said it will raise the reserve ratio requirement for the nation’s banks by 50 basis points from Nov. 29, draining cash from the financial system. “Monetary policy is being tightened, as it should be, and a rate hike will follow sooner than later,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. The dollar declined for a third day against the euro to trade at $1.3688, after losing 0.8 percent yesterday. The Dollar Index, which measures the greenback against six other major world currencies, was down 0.4 percent. Irish Central Bank Governor Patrick Honohan said yesterday in an interview with state broadcaster RTE that he expects the country to ask the EU and the International Monetary Fund for “tens of billions” of euros to rescue its banks. Royal Dutch Shell Plc declared force majeure, a legal clause that allows producers to miss export obligations because of circumstances beyond their control, on Bonny crude loadings in Nigeria following a pipeline leak. Force majeure is “effective 12 noon today” because of leaks on the Trans Niger Pipeline,’’ Precious Okolobo, Shell’s spokesman in Nigeria, said by phone from Lagos today. Oil in New York may increase next week amid speculation Ireland will accept the bailout, a Bloomberg News survey showed. Eighteen of 38 analysts and traders, or 47 percent, forecast crude will climb through Nov. 26. Ten respondents, or 26 percent, predicted prices will fall and 10 estimated there would be little change. Last week, 43 percent said futures would rise. To contact the reporter 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

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