(by Ameli Berksman)

Crude oil dropped 8% on Friday as China eased concern on growing winter demand upping interest rate 0.27% for the first time in 9 years.

December crude oil fell 0.9% (45 cents) to $50.47 per barrel on the New York Mercantile Exchange. London Brent crude dropped 57 cents at $47.80 per barrel.

On Thursday, the People’s Bank of China announced the interest rate increase by 0.27 percentage points to 5.58% for one-year lending and to 2.5% for deposits.

``The potential effects of the Chinese move are very significant because their refining sector is less developed than in Japan and other Asian consumers. They are pulling in a lot of sweet oil from West Africa, which has put them in direct competition with us,” said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts.

``The Chinese don’t have the most sophisticated methods of managing their economy. The historical pattern has always been incredible growth followed by sudden slowdowns. It’s a real stop-and-go pattern,” he added.
China’s demand for oil is anticipated to increase by 5.6% to 6.68 million barrels per day, down from earlier estimated 7.6% jump to 6.84 million barrels per day, the International Energy Agency reported.

"We can only sit back and wait to see if the measures they take will curb their growth and thus bring oil demand lower," said Michael Cavanaugh, an analyst at MyFuturesOnline.com.