Chinese banking strategy brings crude lower

26 January 2010

Written by Kim Bardsley

Crude oil prices moved lower this morning as Chinese authorities pursued a further tightening of national lending policy.

Crude oil prices were approaching $74 (£45) a barrel on the New York Mercantile Exchange this morning (January 26th), with many traders concerned by the latest restrictions imposed on Chinese banks.

The country's central bank has reportedly told a number of high-profile lenders that they need to raise their reserve ratios immediately, in an act viewed as a further crimp on speculative lending.

There are widespread concerns that such a strategy may put a halt to a nascent global economic recovery.

Speaking to Reuters, Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan, said that there is "still a lot of uncertainty in the stock market" and insisted crude prices may yet fall below $70 a barrel.

Heating oil prices also retreated during the Asian trading session this morning, weighed down by lending conditions in China and resurgent concerns about fuel demand in the US now that the cold weather seen across the northern hemisphere has eased off.

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