Price of oil drops on report that China raising fuel prices

John Wilen, THE ASSOCIATED PRESS
NEW YORK - Oil prices dropped Thursday morning on reports that China is raising fuel prices, a move that could significantly cut the booming Asian nation's oil consumption.

Light, sweet crude for July delivery fell $1.83 to US$134.85 a barrel on the New York Mercantile Exchange after dropping more than $3 earlier.

Growing Chinese demand for oil and fuel have underpinned the multi-year rally in oil prices. But higher prices could crimp that demand.

"This could change the psychology of the market completely," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

However, declines were limited Thursday by news of an attack on a Nigerian oil field, which has taken about 200,000 barrels of crude per day out of production.

At the pump, meanwhile, gas prices slipped 0.2 cent overnight to a national average of US$4.073 a gallon (C$1.09 per litre), according to a survey of stations by AAA and the Oil Price Information Service.

© The Canadian Press, 2008