London: Oil weakened on Friday after China lifted lenders’ reserve rate requirements by 50 basis points from February to temper inflation.
China’s move is the seventh increase since early 2010, and fanned expectation that Beijing’s appetite for buying commodities, and oil, could lessen.
US crude oil futures fell by $1.10 to $90.30 a barrel by 4:13pm.
February’s Brent crude contract was flat at $98.06 a barrel, before expiring at the end of trading on Friday. The March contract, which will become the front month on Monday, shed 16 cents to $97.13 a barrel.
“It was widely expected (China) would try to tighten the monetary base further,” Commerzbank’s Eugen Weinberg said. “It’s not actually surprising that they are trying to take steam out of the economy.”
“The market was pricing in the perfect world, and (...) although not unexpected this might change sentiment and provoke profit-taking,” he said.
The discount for US crude futures against Brent stood at $7.74 by 1042 GMT, after widening to $7.81 on Thursday, the widest discount since February 2009.
The dislocation between the two was further exacerbated this week by production snags from Norway to Alaska, reinforcing the view that a tightening of global oil markets could benefit waterborne Brent crude over the US futures marker WTI, a grade delivered at the landlocked storage hub of Cushing, Oklahoma.
Alaska’s main oil pipeline moved closer to restoring oil shipments to full volumes on Friday.
The line, which was closed after a leak last week, choked crude flow to about half of normal levels of 320,000 barrels per day on Thursday.
“Supply concerns have played a key role in oil’s ascent from the $80 a barrel level but are showing signs of abating as of late,” Gain Capital Forex.com senior market strategist Daniel Hwang said in a note late on Thursday. The pipepline closure lent support to Brent crude prices this week, lifting prices $1 shy off the $100 mark.
“The shutdown in the Trans Alaska Pipeline, a major distributor to the West Coast, seems to be resolved and is likely to allay fears of any long term supply disruptions,” Hwang said.
Investors will also eye a flurry of data from the world’s largest oil consumer, the United States, which will issue readings of the consumer price index, December retail sales and the Reuters/University of Michigan sentiment.