Oil Prices Waiver on Chinese Demand Concerns


"Government leaders fear a sharp rise in prices could trigger unrest."

Oil prices moved between small gains and losses on Tuesday after China increased key interest rates to help slow inflation in its growing economy. That raised concerns that the country's thirst for oil would diminish as well.

West Texas Intermediate crude, or WTI, for March delivery added $0.15 at $87.63 a barrel in morning trading on the New York Mercantile Exchange. In London, Brent crude rose $0.60 to $100.47 per barrel on the ICE Futures exchange.

China's central bank raised interest rates for the third time since October to rein in inflation. The country's inflation rate hit a 28-month high of 5.1% in November before moderating in December. Government leaders fear a sharp rise in prices for things like food and fuel could trigger unrest.

China is the second-largest energy consumer in the world, after the U.S. China's so-called "apparent oil demand" jumped 11.43% to a record 434.4 million metric tons in 2010 from the previous year, according to Platts, the energy information arm of McGraw-Hill Cos.

The figure is based on refinery and net oil product import data as reported by the National Bureau of Statistics and Chinese customs, Platts said. The Chinese government doesn't release actual oil consumption data.

China imports 5.5 million barrels of oil a day and uses about 10 million barrels a day, according to Michael Lynch, president of Strategic Energy & Economic Research.

Investors also are concerned about growing U.S. oil supplies while demand for oil and gas is still mediocre in the recovering economy. The government is expected to release its latest oil inventory report on Wednesday.

"Given that we have more than adequate inventories, it seems highly unlikely that we're going to see much tightness, I think, in the gasoline market," Lynch said.

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe