* Chinese rate rise could slow demand
* No OPEC action expected for now
* World economy can withstand $100 oil price-Kuwait
(Updates throughout, previous Singapore)
By Barbara Lewis
LONDON, Dec 27 (Reuters) - Oil climbed to a 26-month high on
Monday before easing slightly as uncertainty about Chinese fuel
demand following a surprise interest rate rise countered the
bullish impact of a blizzard in the U.S. Northeast.
U.S. crude for February <CLc1> was trading 24 cents lower at
$91.26 a barrel by 1053 GMT, after hitting an intraday high of
$91.88 -- the highest since October 2008. ICE Brent crude
<LCOc1> gained 3 cents to $93.80.
Oil prices have climbed 35 percent since this year's low in
May, driven by the combination of a weakened U.S. dollar and
then unusually cold weather in Europe and the United States that
boosted heating fuel demand and slashed inventories.
The rise in the price of oil and other commodities has
raised concerns of inflation in major fuel-importing countries.
As it strives to prevent its economy overheating, China, the
world's second-biggest oil burner after the United States, on
Saturday raised interest rates for the second time in just over
two months. [] Markets had expected the rates rise,
but the timing was a surprise.
When China last raised interest rates in mid-October, oil
fell 4 percent, although the market soon recovered.
Analysts said this time the immediate impact was difficult
to judge because trade is very thin over the year-end holiday
period, but in general a slower Chinese economy implied reduced
oil consumption.
"What it does show is that China is serious when it says
2011 is going to be the year of prudent fiscal policy," said
Olivier Jakob of Petromatrix.
"Further Chinese interest rate hikes will now be expected
for 2011."
WIDER COMMODITIES RALLY INTACT?
Longer term and especially for other commodities with more
fundamental strength than oil, analysts predicted a raw
materials rally had further to run.
"This certainly doesn't spell the end of the commodities
boom or the strong China story. It's a smart move that may have
caught the market off guard," said Mark Pervan, senior
commodities analyst at ANZ. []
Commodities began to rise around September, coinciding with
a wider financial markets rally, following U.S. quantitative
easing that weakened the dollar.
A weaker dollar stokes buying in dollar-denominated
commodities, made relatively cheap for holders of other
currencies.
In December the rally has also drawn strength from strong
heating oil demand because of unusually cold weather in the
northern hemisphere.
The first widespread blizzard of the season slammed into the
northeastern United States, the world's top heating oil market,
on Sunday. []
Any real increase in demand and a subsequent drop in
inventories could eventually persuade oil producers' group OPEC
to act, but at a conference in Quito earlier in December, OPEC
left existing output targets unchanged.
Ministers have said they would not increase output if a
price rally were based on speculation rather than fundamentals
of supply and demand.
Arab members of the Organization of the Petroleum Exporting
Countries met at the weekend in Cairo when Kuwait's oil minister
said the global economy could withstand an oil price of $100 a
barrel.
Other exporters indicated OPEC might decide against
increasing output throughout 2011 as the market was well
supplied. []
(Additional reporting by Randy Fabi; Editing by Alison Birrane)
