Oil prices fall on China concerns

Due to concerns, that major energy consumer China will make moves to slow its booming economy, oil prices weakened.

Oil prices weakened Tuesday on concerns that major energy consumer China will make further moves to tighten credit so as to slow its booming economy, analysts said.

New York's main futures contract, light sweet crude for delivery in March, slid 37 cents to 74.89 dollars a barrel.

London's Brent North Sea crude for March was down 31 cents to 73.38 dollars in late afternoon deals.

Prices were driven lower on ''concerns that China might further restrict bank lending,'' said Victor Shum, an analyst at energy consultants Purvin and Gertz.

- That's what's driving the market - he added.

Policymakers in China have taken steps to tighten credit in a bid to slow down its roaring economy, which grew by a sizzling 10.7 percent in the fourth quarter of last year.

Andrey Kryuchenkov: ''Small rebound on Monday, bouncing off Friday's lows''

China is the world's second biggest oil consuming nation after the United States.

Oil prices had begun the week higher, closing up almost one dollar on Monday as Wall Street recovered, traders said.

- Crude saw a small rebound on Monday, bouncing off Friday's lows - said VTB Capital commodities analyst Andrey Kryuchenkov.

- The market was reversing some losses after a heavy sell-off at the end of last week. However, gains were still capped, as little changed fundamentally (regarding supply and demand). Overall, oil was still trading in line with the broader market - he added in a note to clients.

Prices slumped last week on the growing concerns about Chinese policy and after US President Barack Obama unveiled plans to crack down on the US financial sector, hitting overall investor confidence.

Gasoline, or petrol, reserves in the United States -- the world's biggest energy user, increased by a larger-than-expected 3.9 million barrels in the week ending January 15, striking a two-year high, official data showed.

US refineries operated at 78.4 percent of capacity -- their lowest rate in at least two decades apart from the immediate aftermath of a hurricane.

World oil demand meanwhile grew between October and December after sliding during the previous five quarters, the Centre for Global Energy Studies said in a monthly report published on Tuesday.

- Global oil demand has finally turned the corner, with oil use in the fourth quarter of 2009 up on the fourth quarter of 2008 after five consecutive quarters of year-on-year decline - the London-based CGES said.

- The recovery in oil use remains fragile, though, and concentrated in developing countries - CGES added.

The CGES also cautioned that supply and demand conditions would not warrant higher prices this year.

- Despite rising demand, market fundamentals are not expected to support upward pressure on oil prices in 2010 - it said, noting that only ''temporary'' factors had boosted the market in recent months.

- The recent surge in oil demand has been boosted by temporary seasonal factors, driven by extremely cold weather across much of the northern hemisphere which is unlikely to last beyond the end of the first quarter - CGES said.