Oil at $85 as Chinese rate hike worries weigh

PERTH Mon Nov 15, 2010 1:39pm IST

An employee counts currency at a fuel station in Mumbai June 25, 2010.  REUTERS/Danish Siddiqui/Files

An employee counts currency at a fuel station in Mumbai June 25, 2010.

Credit: Reuters/Danish Siddiqui/Files

Related Topics

PERTH (Reuters) - Oil prices remained steady around $85 a barrel on Monday, as the prospect of Chinese interest rate increases and uncertainty about sovereign debt in Europe continued to weigh on the market.

"The market is worried about consumption, that China will introduce interest rates that will slow demand and as a result of that you could find that oil could trade a lot lower," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

Analysts said that continued concerns about demand could depress oil prices down to the $80 a barrel level.

U.S. crude for December delivery rose 20 cents to $85.08 a barrel at 0712 GMT.

ICE Brent rose 28 cents to $86.62.

Last week oil prices soared to their highest levels since October 2008, touching an intra-day peak of $88.63 on Thursday, before concerns that a Chinese interest rate hike was imminent pressured prices on Friday.

Although China's central bank did not announce a rate increase at the weekend, continued worries about monetary tightening reduced the appetite for risk, analysts said.

On Monday, the head researcher for the People's Bank of China called for tightening of monetary conditions. Last month, PBOC surprised markets by announcing the first rate rise in nearly three years.

Concerns about European sovereign debt, especially in Ireland, also continued to weight on market sentiment, with Ireland saying that it could not rule out turning to Europe for help in dealing with its debt crisis.

Worries about European sovereign debt were compounded by the G20 and APEC meetings, where leaders of the world's most powerful economies failed to reach any agreement on how to prevent fresh crises.

The International Energy Agency (IEA), an adviser to 28 industrial countries, predicted on Friday oil demand growth will slow in 2011, while raising its 2010 forecast, providing no comfort to traders looking for a more sustained global demand recovery.

The new downward pressure on oil prices interrupts a two-week rally in oil, which was fueled partly on signs that the Organization of the Petroleum Exporting Countries (OPEC) can tolerate higher oil prices and on a plan by the U.S. Federal Reserve to buy $600 billion in Treasury bonds to help speed economic growth.

(Editing by Ed Lane)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.52 percent to an all-time high of 27,762.13. The broader Nifty gained as much as 1.49 percent to a record of 8,291.65.  Full Article 

REUTERS SHOWCASE

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage