Oil declined as the dollar strengthened on Thursday after Treasury Secretary Timothy Geithner said there was no deliberate policy to devalue the currency, while China’s economy slowed in the third quarter.
Front-month U.S. crude, from Thursday the December contract following November’s expiry a day earlier, fell 57 cents to $81.97 a barrel by 0557 GMT, after rising almost 3 percent on Wednesday. ICE Brent dropped 45 cents to $83.15.
The dollar, the yen and the euro are “roughly in alignment,” Geithner told the Wall Street Journal in an interview, suggesting there was no need for the greenback to sink further.
China’s growth receded in the third quarter and inflation edged just a touch higher, showing the economy was strong but far from overheating and suggesting that an interest rate rise this week, the first in almost three years, may be enough for now.
“The market is uncertain about how a tightening policy in China will impact on growth,” said David Taylor, an analyst at CMC Markets in Sydney. “The China growth story is crucial to the sustainability of the Asian region.”
“From an energy consumption point of view, China is the world’s largest energy consumer and there is nothing to suggest that it is pulling back from that, so it’s supportive.”
China’s economic growth in the July-September quarter was a touch stronger than expected at 9.6 percent, down from 10.3 percent in the second quarter, while consumer inflation hit a 23-month high of 3.6 percent in September, in line with market projections.
Still, for some, the numbers constituted a downside surprise after recent market chatter that growth and inflation had been much stronger, prompting the rate increase.
“We are seeing some risk aversion from the higher inflation,” Taylor said. “When you see risk aversion the dollar strengthens and that puts pressure on commodities.”
Oil swayed from gains to losses early on Thursday as the dollar strengthened from a 15-year low against the yen on speculation about the size and timing of an expected stimulus to the U.S. economy. The greenback gained more than 0.1 percent against a basket of currencies.
A report from influential consultancy Medley Global Advisors said the Fed planned to buy $500 billion of Treasuries over six months and leave itself room for more buying.
Oil on Wednesday posted its biggest daily percentage gain in more than a month, after a slump of more than 4 percent on Tuesday, when China raised interest rates. Prices reached a five-month high of $84.43 on October 7.
China’s implied oil demand in September rose 6.2 percent from a year earlier to about 8.68 million barrels per day (bpd), Reuters calculations based on preliminary official figures showed on Thursday, just short of a record-high 8.9 million bpd in June.
The growth rate, which eased off the double-digit base seen during most of the first half of 2010, came on top of a strong base in September 2009, when demand rose at the fastest pace in three years.
The country’s domestic crude production jumped 9 percent to a record 4.18 million bpd in September.
“China, in my view, are certainly moving toward being more self-contained,” Taylor said.
“They will be producing and consuming more energy, and they will develop technology, aiming to decouple their risk away from external suppliers.”
Several key oil and container ports in southern China were closed on Thursday ahead of Typhoon Megi, stopping bunker fuel deliveries and forcing tankers to evacuate to calmer waters, industry sources said.
U.S. crude oil inventories rose last week by a smaller-than-expected 667,000 barrels as imports increased, a weekly report from the federal Energy Information Administration showed on Wednesday.
Distillate stocks were also bullish, falling more than expected, but gasoline inventories surprised analysts with a rise of 1.2 million barrels, weighing on the motor fuel market.