Oil remains below $78 amid concerns on China

London : Oil fluctuated below $78 a barrel yesterday as worries that China will take further measures to temper its booming economy offset its return to double-digit growth for the first time since 2008.

US crude oil for March delivery, the new front-month contract, rose 14 cents to $77.88 a barrel. Fears that tightening in China would slow consumption growth in the world's second largest oil consumer capped gains. London Brent crude rose 1 cent to $76.33.

China's annual gross domestic product growth accelerated in the fourth quarter to 10.7 per cent — the fastest in two years — from a revised 9.1 per cent in the third, the National Bureau of Statistics (NBS) said yesterday. For all of 2009, China grew 8.7 per cent.

"Investors will soon have to assess whether this report — and others like it — will be strong enough to allow the commodity rally to continue without alarming the authorities even further," MF Global analyst Edward Meir said.

World growth could falter as governments pull back some of the extraordinary liquidity they pumped into markets, the World Bank said on Wednesday.

Lending surge

In China, a 4 trillion yuan (Dh2.15 trillion) stimulus package was complemented by an unprecedented surge in lending by predominantly state-owned banks last year. But the government has signalled it will tighten credit in 2010, calling on banks to increase reserves and curb lending.

On Chinese oil data, the country's December crude runs, or the amount of crude processed by refiners, jumped 24.8 per cent from a year earlier to a record 8.15 million barrels per day. Runs were up 7.9 per cent overall in 2009.

"For all of this year we are going to have a big focus on China because it will be the main driver of demand," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.