Oil slips from record high on China demand worries

Oil surged to a record peak near $127 today

Oil slipped from a record high over $126 a barrel today as a dip in crude oil imports into Number 2 consumer, China stirred concerns high prices were eating into demand.

US crude traded down 24c to $125.72 a barrel, off an earlier record high of $126.40 a barrel. London Brent crude traded down $1.01 to $124.39 a barrel.

China's April crude oil imports decreased against year-ago levels, the first monthly year-on-year decline in 18 months, although analysts said the dip was a one-off adjustment as refiners ran down stocks after unusually high March purchases.

Strength in distillates for power generation globally has supported crude in recent weeks, and signs demand could falter helped weaken the energy complex, Zarembski added.

Booming demand in emerging economies such as China and India have sent oil prices up six-fold since 2002, with the weak dollar also drawing a wave of speculators seeking a hedge against inflation over the past eight months.

Oil has jumped about 13% since slipping to $110.53 a barrel on May 1, as investors seized on supply disruptions in the North Sea and Nigeria, as well as demand for distillate fuels such as diesel.

ICE gas oil futures fell more than $8 today on the expiry of the prompt contract, after rising to near last week's record high of $1 210 a tonne in early trading.

Meanwhile, a recent Sanford C. Bernstein study said that investment flows in the Standard & Poor's GSCI index and Dow Jones-AIG Commodity Index had risen to $250 billion so far this year, up from $169 billion at the start of the year.

Oil's runaway gains prompted talk last week OPEC could consider boosting output before its next scheduled meeting in September should crude oil prices keep rising. But oil officials from Ecuador, Qatar, the UAE and Iran said there were no plans for an early meeting as soaring prices were out of OPEC's control. - Reuters