April 5 (Bloomberg) -- Crude fell from its highest in more than 30 months as forecasts for growing inventories in the U.S. and an interest-rate increase in China fanned concern that demand in the world's two biggest oil consumers may slow. Futures slid as much as 0.9 percent in New York before a report tomorrow that may show supplies increased by 1 million barrels last week, and after China's central bank raised one- year lending and deposit rates. Prices also fell after the New York Times reported that sons of Libya's Muammar Qaddafi are seeking his ouster, stoking speculation that the fighting that has crippled the country's oil exports may ease. "China just has to keep putting the brakes on, as inflation is too high," said Axel Herlinghaus, Frankfurt-based senior commodities analyst at DZ Bank AG, which trades crude in London and New York. "This could reduce demand at the margin." Oil for May delivery on the New York Mercantile Exchange dropped as much as 97 cents to $107.50 a barrel and was at $107.95 at 12:45 p.m. London time. It traded as high as $108.78 a barrel yesterday, the front-month contract's highest price since Sept. 24, 2008. Brent for May settlement fell as much as $1.11, or 0.9 percent, to $119.95 a barrel on London's ICE Futures Europe exchange. The contract rose to $121.29 a barrel yesterday, the highest since Aug. 4, 2008. The European benchmark traded at a premium of $12.60 a barrel to U.S. West Texas Intermediate futures. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and supplies climbed at Cushing, Oklahoma, the delivery point for WTI. China Interest Rates China raised interest rates by 25 basis points, the fourth increase since the global financial crisis, to restrain inflation in the world's fastest-growing major economy. The increase "might put a brake on growth in oil demand in China," Paul Harris, head of natural resources risk management at Bank of Ireland in Dublin, said by phone. In Libya, at least two of Qaddafi's sons are proposing a plan to move him from power and oversee a democratic transition under his son, Saif al-Islam, the New York Times reported yesterday, citing an unidentified diplomat and Libyan official. Libya was Africa's third-largest producer before the conflict began, pumping 1.6 million barrels a day in January, according to Bloomberg estimates. Output has slumped to a "trickle," the International Energy Agency said last month. Gabon Strikes End The unrest in Libya and Yemen is the latest in a wave of uprisings that has toppled the leaders of Tunisia and Egypt and spread to Algeria, Bahrain, Oman and Syria. Brent has climbed 22 percent since the ouster of Tunisian President Zine El Abidine Ben Ali on Jan. 14. Companies including Total SA operating in the West African nation of Gabon resumed production after a strike. "We should get back to normal production by today," Phenelope Semavoine, a Paris-based spokeswoman for Total, said by phone. Royal Dutch Shell Plc, Tullow Oil Plc and Vaalco Energy Inc. also said output was returning to normal. Crude output in Gabon averaged 240,000 barrels a day in 2010, the International Energy Agency said on March 15. Stockpiles in the U.S. increased 0.3 percent in the seven days ended April 1 from 355.7 million a week earlier, according to the median of nine analyst estimates before the report tomorrow. Eight of the respondents forecast a gain and one a decline. The industry-funded American Petroleum Institute will publish its own data today. Stockpiles at Cushing surged to a record last month. Inventories of distillate fuel, a category that includes heating oil and diesel, probably increased 500,000 barrels from 153.3 million, the survey showed. --With assistance from Lifei Zheng in Beijing, Ann Koh in Singapore and Ben Sharples in Melbourne. Editors: John Buckley, Justin Carrigan

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