Oil declines

Oil fell on Friday in volatile trading as worries about China's moves to cool inflation and technical selling helped reverse crude from an earlier peak reached on news of surging Chinese imports. The dollar and euro seesawed, with the greenback's intraday strength weighing on oil.
China's central bank on Friday increased the amount of money lenders must keep on reserve for the third time in one month, a move to mop up excess cash in the economy and rein in inflation. Concerns that an interest rate hike could be forthcoming remained even as the reserves boost suggested that perhaps the Chinese had decided higher rates may not be needed.
US crude for January delivery fell 66 cents to $87.71 a barrel by 12:41 pm EST (1741 GMT), having posted an intraday $89.00 peak. Despite reaching a 26-month high of $90.76 on Tuesday, US crude oil futures are headed for a weekly loss unless a rally allows for a settlement above $89.19. Oil rose 6.48 percent last week, a second straight weekly gain.
The week's peak just topped the $70-$90 a barrel price range that Saudi Arabia and Opec last month deemed acceptable to consumers and came as Opec prepared to meet on Saturday, with oil ministers expected to retain existing supply targets. "This looks like a technical move to us. We have had a period of consolidation after the move up on Tuesday," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
Armstrong had pegged support at $87.14 and $86.76. Total US crude trading volume was tepid, just above 310,800 lots, 52 percent below the 30-day average. ICE Brent crude for January delivery fell 57 cents to $90.42 a barrel, slipping from an early $91.57 peak.
"The market just continues to struggle in the high $80s," said Tom Bentz, broker at BNP Paribas Commodity Futures in New York. "The Chinese rise in November imports and exports is supportive but being offset by the China central bank raising reserves as well as the potential for an interest rate hike over the weekend."
Bentz pointed to technical selling when prices tested support at $87.33 and noted US gasoline futures had weakened after rallying the previous session on a refinery unit shutdown. China's crude oil imports jumped 22.1 percent last month from a year earlier to 5.09 million barrels per day, the fourth-highest monthly average on record.
Two of the world's most influential oil forecasters - Opec and the International Energy Agency - had different demand outlooks for 2011 on Friday, as the IEA anticipated robust demand while producer group Opec said supply was plentiful. The IEA, an adviser to 28 industrialised countries, in a monthly report lifted its 2011 oil demand growth forecast by 130,000 barrels per day to 1.32 million bpd.
Opec forecast 2011 global oil demand growth would increase to 1.18 million bpd, only 10,000 bpd more than predicted last month and making the case for no change in supply policy when oil ministers meet on Saturday in Quito. Opec's secretary-general has said it wanted an improvement in oil market fundamentals before increasing crude supplies, even if prices go to $100 a barrel.