Oil dropped, failing to extend last week’s rally, as steps by China to cool its economy stoked speculation demand may slow in the world’s biggest energy user. Futures slid as much as 0.5 percent on signs China may take further measures to prevent overheating. The People’s Bank of China told lenders Jan. 14 to hold more deposits as reserves, lifting required ratios for the fourth time in two months. Asian stocks fell, snapping five weeks of gains. Crude advanced 4 percent last week after U.S. industrial production rose. “There are expectations that there may be more measures as the year goes on,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “It is having a damping effect on the rally in oil futures.” The February contract declined as much as 48 cents to $91.06 a barrel in electronic trading on the New York Mercantile Exchange, and was at $91.15 at 4:03 p.m. Singapore time. It settled at $91.54 on Jan. 14, capping its biggest gain in six weeks. Prices are up 17 percent from a year earlier. The Chinese government is trying to mop up liquidity resulting from its policy of limiting currency appreciation and from surging inflows of capital from overseas. The International Energy Agency estimates the country’s oil demand will account for about half of the growth outside the Organization for Economic Cooperation and Development this year. The MSCI Asia Pacific Index declined 0.6 percent to 138.12 and China’s Shanghai Composite Index fell 3 percent. Hedge Funds Hedge funds raised bullish bets on oil by the most in five weeks through Jan. 11 as crude reached the highest level in more than two years amid signs that the global economic recovery is gaining momentum. The funds and other large speculators increased net-long positions, or wagers on rising prices, by 12 percent in the seven days ended Jan. 11, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest advance since the week ended Dec. 7. “When this length is speculative trading gets to a very high level, the market faces a very high risk of triggering some liquidation,” said Purvin & Gertz’s Shum. Brent crude for March settlement was at $98.34 a barrel, down 4 cents, on the London-based ICE Futures Europe exchange. It gained $1.09, or 1.1 percent, to $98.38 on Jan. 14. Alaska Pipeline Alyeska Pipeline Service Co. plans to start its Trans Alaska Pipeline System today after repairs to the line that carries 11 percent of U.S. crude production took longer than scheduled. The operator intends to resume flows through the line “early” local time Jan. 17, according to a situation report by the Unified Command in Fairbanks, Alaska, which was formed in response to the leak and includes Alyeska, the U.S. Environmental Protection Agency and the Alaska Department of Environmental Conservation. A breach on Jan. 8 closed the pipeline. It was temporarily started Jan. 11 to help prevent wax and ice accumulation inside the pipe. The 800-mile (1,287-kilometer) line carries oil from Prudhoe Bay south to Valdez, where it’s loaded on tankers bound for refineries in Alaska and on the U.S. West Coast. Crude oil may decline this week, a Bloomberg News survey of traders and analysts showed. Seventeen of 40 analysts, or 43 percent, forecast crude oil will fall through Jan. 21. Last week, 52 percent said futures would drop. To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net To contact the editor responsible for this story: Jane Lee in Kuala Lumpur at jalee@bloomberg.net

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