Oil falls below $82; China inflation spikes

Thursday, March 11, 2010

LONDON (Reuters) - Oil fell below $82 a barrel on Thursday, retreating from an eight-week high hit a day earlier as a spike in Chinese inflation had investors mulling prospects of monetary tightening in the heart of energy demand growth.

A smaller than expected drop in the number of U.S. workers filing new applications for unemployment benefits also weighed on sentiment, but falling gasoline inventories in the United States and the first signs of a recovery in demand in 18 months supported prices.

U.S. crude for April fell 45 cents to $81.64 a barrel by 1412 GMT, after touching $83.03 on Wednesday, the highest level since oil's 15-month high of $83.95 on January 11. London ICE pril Brent fell 48 cents to $80.00 a barrel.

"While we think crude prices will test their 2010 high, they are unlikely to substantially exceed it," MF Global analyst Edward Meir said.

"Instead, a potential double-top at $83.95 should provide a technical sell signal that could bring prices back below the $80 mark."

Consumer inflation has soared to a 16-month high in China, the world's second largest oil consumer, and a raft of economic data showed broad-based strength, providing fresh arguments for policy tightening in a bid to stop the economy overheating.

China's booming economy has seen oil imports soar, hitting their second highest ever monthly level in February. On Wednesday, OPEC said Chinese daily oil demand has jumped by almost 2 million barrels in just five years to stand around 8.6 million barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC), which pumps at least one in every three barrels of oil , meets in Vienna on March 17 to discuss production policy. Officials have said they do not expect a change in targets while prices are within their desired range.

This story was featured on the Reuters News website.

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