Oil prices were struggling to stay above $80 a barrel Wednesday, recovering only some of the previous session’s sharp losses that had been triggered by China’s surprise interest rate hike, The Associated Press reports.
By early afternoon in Europe, benchmark oil for November delivery was up 64 cents to $80.13 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the day, prices rose as high as $80.61.
The contract tumbled $3.59 to settle at $79.49 on Tuesday after China raised rates for the first time since 2007 to help tame inflation and cool credit growth. It was oil’s biggest one-day drop since February.
“Markets were blind-sided” by the 25-basis-point increase in China’s benchmark one-year lending and deposit rates, the first such increase in some three years, said Edward Meir of MF Global in New York.
The move spooked investors and helped shake the two pillars of oil’s monthlong jump above $80 a barrel — the global stock market rally and the weakening dollar. Asian stock markets were mixed and European ones mostly higher on Wednesday after the Dow Jones industrial average fell 1.5 percent.
“Commodities prices in general have been on a tear over the past six weeks and much of that is due to Chinese consumption,” Sander Capital Advisors said. “Not everything can go up forever before ill effects take place.”
Oil rebounded despite a report from the American Petroleum Institute late Tuesday that crude inventories rose 2.3 million barrels last week. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 2.1 million barrels. Inventories of gasoline and distillates fell, the API said.
The Energy Department’s Energy Information Administration reports its weekly supply data later Wednesday.
Prices were “edging back to their fundamentally justified level, which we believe is well below $80,” said a report from Commerzbank in Frankfurt. “Indeed, there has been no change in the fundamental data in past weeks … the market is still amply supplied with oil.”
A weaker dollar also contributed to higher oil prices by making crude cheaper for investors holding other currencies.
The 16-nation euro rose to $1.3828 in Europe from $1.3744 late Tuesday in New York.
In other Nymex trading in November contracts, heating oil rose 1.85 cents to $2.2078 a gallon and gasoline gained 1.43 cents to $2.0470 a gallon. Natural gas added 2.8 cents to $3.541 per 1,000 cubic feet.
In London, Brent crude rose 85 cents to $81.95 a barrel on the ICE Futures exchange.
