Oil Declines with Drop in Chinese Demand


"Recent robust prices due to expectations of Chinese growth."

Crude declined as China's oil processing grew the least in 18 months after government measures to cool the economy reduced fuel consumption.

Oil slipped as much 2.1% following data from China Mainland Marketing Research Co. that showed refineries in the world's biggest energy-consuming country processed about 8.5 million barrels per day in September, a 6.6% gain from a year earlier and the smallest increase since March 2009.

"The Chinese numbers didn't knock the socks off of oil traders," said Phil Flynn, vice president of research at PFGBest in Chicago. "You've got a China demand premium built into the oil price. The disappointing numbers overnight, together with slower GDP growth, higher inflation and higher interest rates, are putting a damper on bullish sentiment."

Crude oil for December delivery fell $1.59, or 1.%, to $80.95 /barrel at 11:42 a.m. on the New York Mercantile Exchange. Prices are down 0.5% from a year ago.

Brent crude oil for December settlement declined $1.20, or 1.%, to $82.40/barrel on the London-based ICE Futures Europe exchange.

The Chinese economy grew 9.6% in the third quarter and inflation accelerated to the fastest pace in almost two years. Consumer prices jumped 3.6% in September from a year earlier, the statistics bureau in Beijing said today.

"We're starting to see a bit more of a focus on the fundamentals of the market," said Michael Fitzpatrick, a broker with MF Global in New York. "We've traded with the stock market and the dollar lately, but those correlations are staring to break down."

"If it weren't for the Dow and dollar, oil would be getting hammered real hard," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "Prices have been quite robust lately, and a large part of that was due to expectations of ever-faster Chinese growth."

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