Oil prices have edged up as doubts have crept in over whether a fuel price rise in China will reduce demand.

US sweet, light crude rose 73 cents to $132.66 a barrel, while London Brent rose 95 cents to $132.95.

Crude prices tumbled more than $4 a barrel on Thursday after the unexpected announcement that China would increase petrol and diesel prices by 18%.

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Oil prices have risen about 40% this year, reaching almost $140 a barrel earlier this week.

Mixed reaction

China's rapid economic growth has been one factor driving up prices.

Some analysts have said that fuel subsidies in China have helped to increase demand, and an increase in retail prices could dampen energy consumption.

But others think the impact could be muted, as refiners will be encouraged to increase production to take advantage of the better prices.

This would lead to improved fuel supply at the pumps, which would help to meet pent-up demand.

Chinese fuel prices have been frozen since an 11% rise in November. Refiners have been cutting output to minimise losses and this has led to rationing and queues at petrol stations.

"The markets could go back and forth on the Chinese announcement for a while," said Edward Meir at commodities brokerage MF Global.

With supply running short in many parts of the country, he added, "demand could move even higher, as much of the country's pent-up needs would be met".

Other factors behind the relentless rise in oil prices over the past few months include political problems in major oil producing countries, which have either reduced or threatened to reduce global supply.

Venezuelan President Hugo Chavez has threatened to stop exports to European countries if the EU applies stringent new immigration laws.

His comments came as the country said it would not attend the emergency meeting on Sunday in Saudi Arabia between oil producers and consumers to discuss prices.

(BBC)

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