Oil prices rise, but more declines expected
Rising inventories in US, rate hike in China sparked downward trend
LONDON -- Oil prices bounced higher yesterday following two days of sharp declines that came on the heels of rising inventories of crude in the United States and a move by China to cool its economy.
Prices rose ahead of the weekend as traders sought to protect themselves in the event of a supply disruption before Monday. But traders said they expect prices to move lower again by early next week in anticipation of the US Energy Department's next petroleum supply report.
Light crude for December delivery rose 84 cents to $51.76 per barrel on the New York Mercantile Exchange. In London, December Brent crude futures gained 61 cents to $48.98 per barrel.
The slide in prices began Wednesday after the US government said crude supplies had increased by 4 million barrels to 283.4 million barrels last week -- roughly double the increase Wall Street was expecting. Then China raised its interest rates for one-year loans on Thursday -- the first increase in more than nine years. Beijing is trying to curb rising investment that has kept economic growth at over 9 percent a year, caused oil demand to surge and has pushed inflation to a seven-year high.
Some analysts believe the recent oil price rally is over.
Ed Silliere, vice president of risk management at Energy Merchant in New York, said, "The latest leg -- if it is not in fact the last leg -- of the bull market, is over."
"When it nearly hit $56 [on Monday], the market was really pushing the boundaries of its highs," said Daniel Hynes, energy analyst at ANZ Bank in Melbourne. "Once we got the big increase with US stocks, it was enough of a spark . . . it gained momentum after China raised interest rates.
While crude prices are still up by more than 70 percent from a year ago, they would need to surpass $90 per barrel to approximate the record high, in inflation-adjusted terms, set in 1980.
In Jakarta, OPEC president Purnomo Yusgiantoro said he expected the downward trend to gain momentum.
Also allaying oil supply worries was news of some recovery in the hurricane-hobbled Gulf of Mexico. Daily production among the Gulf of Mexico platforms remains around 20 percent below normal since Hurricane Ivan hit the region in mid-September.