SINGAPORE: Oil dropped as much as 1.3 percent on Wednesday to the lowest price in November, as speculation mounted that China will step up efforts to cool its economy, while Irish debt jitters accelerated the fall. US crude for December tumbled $1.10 to $81.24 a barrel at 0805 GMT, shedding more than 8 percent from last week's 25-month high of $88.63 in just four sessions. ICE Brent crude fell $1.11 to $83.62. Chinese Premier Wen Jiabao said his government is preparing steps to tame price rises, adding his voice to official efforts to reassure consumers irked by a rapid rise in the price of food and raising concern about potential monetary tightening measures. An interest rate increase in China would curb oil consumption by the world's largest energy user, the main driver for resurging demand in the aftermath of the recession. Risk aversion because of Ireland's debt crisis is also prompting investors to reverse bullish bets across commodities. "World growth has been put under question and markets are nervous," said David Taylor, an analyst at CMC Markets in Sydney, adding that declines in US crude inventories "may be stopping the price from sliding even further." "The market hasn't found support yet. It's the demand side and questions about the US dollar and China's capacity to consume energy going forward. In addition, we have the latest story of the European sovereign debt crisis with Ireland. These aren't small issues." Irish Debt Concerns Euro zone ministers have agreed to send a joint European-International Monetary Fund mission to Ireland that could prepare the way for a bailout to prevent its debt crisis spreading to other countries. Investors gave stocks a wide berth on Wednesday on renewed worries China may hike interest rates this week and after top level meetings in Europe failed to produce a clear solution to tackle Ireland's debt crisis. The tendency of China's central bank to raise interest rates around the 20th day of the month makes this Friday a "sensitive window" for a rate rise, an official newspaper said on Wednesday, citing unnamed analysts. The report in the China Securities Journal did not cite any officials and was based on a potentially flawed reading of the central bank's decision-making history. But US oil inventories provided a ray of hope for oil markets, with the American Petroleum Institute reporting late on Tuesday that the nation's crude inventories tumbled by more than 7 million barrels for the second week in a row. The industry report showed crude stockpiles declined by 7.7 million barrels in the week to Nov. 12, compared with analyst expectations for a 100,000-barrel build. "There is evidence that the economic story in the US isn't as bad as previously thought, and might influence stocks," Taylor said. US gasoline inventories fell 1.7 million barrels, the API said, much more than analyst expectations for an 800,000-barrel decline, while distillate stocks rose by 222,000 barrels, compared with analyst expectations for a 2.2-million-barrel drop. Government statistics on inventories will follow from the US Energy Information Administration on Wednesday at 1530 GMT. US retail gasoline demand rose 2.4 percent last week from the previous one, with the Midwest and Central Atlantic showing the largest growth, MasterCard Advisors' SpendingPulse report showed on Tuesday. Average gasoline demand rose 216,000 barrels per day (bpd) to 9.202 million bpd in the week to Nov. 12. However, demand was down 0.2 percent from the same week last year.
