(Adds quote, updates prices)
By Margaret Orgill
LONDON, April 18 (Reuters) - Oil fell on Friday after a
surge to new record highs this week, pressured partly by a rise
in the U.S. dollar and worries about a possible slowdown in
China, the world's second-biggest energy consumer.
U.S. light crude <CLc1> was down 66 cents to $114.20 a
barrel by 1440 GMT. It set a record high of $115.54 on Thursday.
London Brent crude <LCOc1> was down 62 cents at $111.81. It
struck an all-time peak of $113.38 on Thursday.
"Definitely the stronger dollar and talk of a China slowdown
is certainly weighing also," said Tom Bentz, analyst at BNP
Paribas Commodity Futures Inc.
The dollar reached a 7-week high against the yen and moved
up from record lows versus the euro, after latest quarterly
earnings from U.S. bank Citigroup <C.N> proved less bleak than
expected. []
Gold <XAU=> was down more than 3 percent, pressured by the
gains in the dollar. []
The decline of the U.S. dollar has made commodities priced
in dollars easier to afford for holders of other currencies and
made commodities attractive as a hedge against dollar
depreciation.
A sharp fall in China's stock market on Friday could herald
the start of a slowdown in the Chinese economy, whose rapid
expansion has been one of the main factors driving oil prices to
all-time highs this year, analysts said. []
"The market is a little bit on the defensive. The Chinese
stock market is very weak and it looks as if that pressages an
economic slowdown in China, which would be bearish for oil,"
said Christopher Bellew of Bache Financial.
China's stock market fell nearly 4 percent to a 12-month
closing low as the biggest stock, PetroChina <601857.SS> dropped
for the first time below its price in last October's Shanghai
initial public offer.
The Chinese market has been gripped by a downward trend for
six months, triggered by high inflation and worries of a
threatened economic slowdown later in the year.
Despite these fears, data from China this week showed
continued large import volumes of distillates to meet domestic
demand.
LONG-TERM DRIVERS
The long-term drivers for investment in the oil market are
tight spare production capacity, slow output growth from
non-OPEC producers while robust demand from emerging economies
is more than compensating for declining demand from industrial
nations.
"Market balances continue to look tight, owing to persistent
poor non-OPEC production growth and steady demand increases. On
the demand side Chinese consumption is improving, more than
making up for weak OECD demand," said Barclays Capital.
Bellew noted there were signs of increased speculative funds
coming into the oil market.
The premium for U.S. crude, which attracts most speculative
investment, over Brent rose to $2.06 on Friday, up from a low of
$1.52 in the previous session.
Oil's record run comes as the flow of investment across
commodities shows no sign of abating.
U.S. rice futures extended record highs on Friday and corn
was nearing its high. []. Tin also set a new record this
week of $21,750 a tonne [].
(Additional reporting by Felicia Loo in Singapore and Ikuko Kao
in London; editing by James Jukwey)
