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Originally published Wednesday, January 20, 2010 at 4:31 AM

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Oil near $78 in Asia on China's strong growth

Oil prices hovered near $78 a barrel Thursday in Asia after China, a top oil consumer, declared it has recovered from the global crisis, allaying concerns over its recent crackdown on bank lending.

Associated Press Writer

KUALA LUMPUR, Malaysia —

Oil prices hovered near $78 a barrel Thursday in Asia after China, a top oil consumer, declared it has recovered from the global crisis, allaying concerns over its recent crackdown on bank lending.

Benchmark crude for March delivery was up 1 cent at $77.75 a barrel at late afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract fell $1.58 to settle at $77.74 on Wednesday.

The February contract expired Wednesday, ending down $1.40 at $77.62.

China said its fourth quarter growth surged to 10.7 percent, exceeding most forecasts and lifting 2009's expansion to 8.7 percent. Chinese leaders say stimulus spending will continue but worry about inflation and have ordered banks to curb lending after a record surge in 2009.

"The economic results are still very strong and China remains an engine of growth. It removed some of the earlier concerns about the tightening of monetary policy in China," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Crude prices tumbled Wednesday as China's recent crackdown on bank lending sparked fears that its economic recovery - and its appetite for oil - could falter.

"The monetary tightening is like slowing a sports car that is driving above the speed limit on a highway, down to the speed limit. It is not slamming the brakes but simply to manage inflation risks and avoid asset bubbles. It will mean a steadier economic growth in China, which is good for the global economy and for oil demand," Shum said.

However, uncertainties linger about the pace of the global economic recovery.

The World Bank warned Thursday that the global economy would suffer the fallout from the financial crisis for years to come, with growth possibly wilting later this year as stimulus spending fades.

In other Nymex trading in February contracts, heating oil added 0.36 cent to $2.025 a gallon, while gasoline dropped 0.2 cent to $2.044 a gallon. Natural gas futures rose 2 cents to $5.516 per 1,000 cubic feet.

In London, Brent crude for March delivery fell 11 cents to $76.21 a barrel on the ICE Futures exchange.

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