Oil back above 80 dollars in Asian trade

SINGAPORE: Oil rebounded in Asian trade Wednesday on bargain hunting after prices plunged in reaction to China's surprise interest rate hike.

New York's main contract, light sweet crude for November delivery, rose 57 cents to 80.06 dollars a barrel after dropping by 3.49 dollars on Tuesday in its biggest one-day fall since early February.

Brent North Sea crude for December delivery was up 51 cents at 81.61 dollars after closing 3.27 dollars lower the day before.

"Some saw the big drop as an opportunity to buy. That's why prices are edging up," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"The correction in oil on Tuesday was the result of the surprise move by China to raise interest rates. The fear is that China will slow down in its economic growth and will reduce the buying of commodities and everything else."

China on Tuesday raised interest rates for the first time in nearly three years, rattling global markets.

The People's Bank of China, the country's central bank, increased the one-year yuan lending rate to 5.56 percent from 5.31 percent, and the one-year yuan deposit rate to 2.5 percent from 2.25 percent.

Shum said oil is expected to recover because the factors that pushed prices above 80 dollars a barrel remain, including an expected general weakness in the US dollar.

Strikes in France that threaten to paralyse the economy there were also helping push oil prices higher as the mass actions were causing a fuel supply shortage, Shum said.