* Brent pares gains after China raises bank reserves ratio
* Ongoing Middle East, North Africa tensions support price
* Weekend G20 meeting to address commodity price inflation
(Updates prices, rewrites, adds G20)
By Zaida Espana
LONDON, Feb 18 (Reuters) - Oil prices moved lower on Friday
after China increased lenders' reserve rates, although a
background of continued geopolitical tension in the Middle East
and North Africa lent support.
Brent crude futures <LCOc1> fell 5 cents to $102.54 a barrel
by 1245 GMT, down from earlier gains to $103.5 a barrel. U.S.
March light crude contract <CLc1> shed 14 cents to $86.50.
China raised banks' required reserves by 50 basis points on
Friday, the second such increase this year as it continues the
fight against inflation, and fanning fears this could signal a
curb in its oil demand growth. []
"They have been trying to curb liquidity for some time so
little surprise and not as bad as a benchmark rate rise, but
still slightly weighing on sentiment," Andrey Kryuchenkov from
VTB Capital said.
Despite China's bearish move, analysts said Brent futures
prices could be supported going into the weekend.
"We suspect that the markets will be fairly well bid heading
into the weekend, as developments in the Middle East should
prevent aggressive short positions from building up," MF Global
analyst Edward Meier said in a note.
"It will likely be Brent that will likely see the most price
sensitivity in the event of a serious flare-up, as WTI still
seems to be on the defensive."
Tensions in the Middle East were in focus after Egypt said
on Friday it had received a request for Iranian naval vessels to
pass through the Suez Canal, a move Israel's right-wing foreign
minister has described as "provocative."
"We sent it to the relevant authorities," the Foreign
Ministry spokesman told Reuters, adding the request had been
passed to the Defence Ministry and the Suez Canal Authority.
[]
Libya deployed soldiers in the second city of Benghazi after
thousands of people took to the streets to protest about the
killing of more than 20 protesters, while thousands of Shi'ites
in Bahrain attended the burial of three of those killed in a
crackdown designed to quell protests. []
[]
"When social unrest and political upheaval erupts in the
biggest oil producing region of the globe it is not a wise
strategy to short energy," David Hufton from brokerage PVM wrote
in a note.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphics package on the Middle East
http://r.reuters.com/nym77rTake a Look on []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
G20 ALSO IN FOCUS
Investors were mulling data from the European Central Bank
showing that overnight emergency funding reached 16 billion
euros on Friday, the second consecutive day, and the highest
level since June 2009. []
The news flagged fresh concerns over the health of the
European banking system as finance ministers and central bankers
from the Group of 20 meet in Paris to discuss the global economy
and commodity price inflation over the weekend. []
The U.S. Federal Reserve Chairman Ben Bernanke, ECB
President Jean-Claude Trichet, the Bank of Japan's Masaaki
Shirakawa, the Bank of England's Mervyn King and People's Bank
of China head Zhou Xiaochuan will speak at an event in Paris at
around 1430 GMT.
The debate concerning crude benchmarks continued as the
spread between Brent and U.S. light crude <CL-LCO1=R> traded at
around $13.66 by 1213 GMT.
Nomura's Michael Lo argued the change in global oil demand
growth was playing a role in the weakness of the U.S. light
crude, also known as West Texas Intermediate (WTI).
"Future oil demand growth will likely come from the Asia
Pacific region, and new refineries are being built in this
region to meet new demand. WTI plays almost no part in this
region and the demand and supply dynamics are very different,"
Lo wrote in a note. "Brent is increasingly being recognised as a
crude benchmark in Asia."
The U.S. light crude contract could benefit from
short-covering ahead of expiry of the March future on Tuesday.
Brent oil prices are forecast to drop later this year as
analysts expect the risk premium for unrest in the Middle East
to ebb, a Reuters poll showed. []
(Additional reporting by Jennifer Tan in Singapore and Ikuko
Kurahone in London; editing by James Jukwey)
