WSJ: Crude Loses Ground On Chinese Rate Hike Concerns
NEW YORK (Dow Jones)--Oil prices fell Friday amid a broad drop in commodity prices over worries that China would raise interest rates, possibly slowing growth in the energy-hungry country.
Analysts also suggested crude prices are due for a correction following a brisk run the last several months. Oil futures on the New York Mercantile Exchange are up more than 20% since late August.
Light, sweet crude for December delivery fell $1.22, or 1.4%, at $86.59 a barrel on the Nymex. Brent crude on the ICE futures exchange gained dropped $1.17, or 1.3%, at $87.64 a barrel.
The prospect that China could hike interest rates has raised concern that the fast-growing economy would rein in growth, possibly slowing petroleum demand.
"Much of this liquidation appears prompted by growing expectations that China is poised for another interest rate hike," said Jim Ritterbusch, of Ritterbusch & Associates, in a report. "This possibility of Chinese monetary tightening has prompted a sharp decline in the Shanghai composite index of as much as 5% overnight."
Concerns over monetary tightening in China follows a report Thursday that a key indicator of crude demand hit a record level in October. Oil volumes processed by Chinese refineries, called throughput, climbed to 37 million metric tons, or 8.75 million barrels a day, last month.
Meanwhile, analysts said the crude markets are likely experiencing a correction following steady price increases the last several weeks. Crude prices have risen seven of the last 10 sessions in November.
"There's been a lot of speculative money coming into commodities," said Andy Lebow, oil analyst with MF Global. "I think some of this new money is exiting."
Oil's rally has largely followed the weakening dollar, a result of the Federal Reserve's plan to pump $600 billion into the financial markets. A weaker dollar typically raises oil prices because it makes the commodity cheaper in foreign currencies, although the greenback is down slightly early Friday.
Other commodities were lower Friday, with gold futures are down $12.70 at $1,390.60.
Front-month December reformulated gasoline blendstock, or RBOB, recently traded down 0.53 cent, or 0.2%, at $2.2304 a gallon. December heating oil fell 2.64 cents, or 1.9%, at $2.4002 a gallon.
-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; dan.strumpf@dowjones.com.
