Oil keeps up as China commodity market crumbles

World oil prices remained marginally up in Asian trade Thursday as US crude inventories dropped amid reports of declines in Chinese commodity futures due to extensive sell off.

Light sweet crude for October delivery was seen trading at $74.71 a barrel at 12.00 noon Singapore time while Brent crude was at $78.26 on the ICE Futures exchange.

In other Nymex trading in October contracts, heating oil rose 0.24 cent to $2.084 a gallon and gasoline was steady at $1.939 a gallon. Natural gas for October delivery held at $3.815 per 1,000 cubic feet.

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Analysts said the black gold is likely to monitor reports of dips in Chinese commodity futures due to heavy sell off as the government ordered an enquiry into speculative funds in the Shanghai rubber market.

Chinese commodity futures prices fell about two per cent on Thursday as traders scrambled to identify the cause of the widespread sell-off.

However, the immediate influence on prices came from drops in US crude inventories as American Petroleum Institute said crude inventories fell 7.3 million barrels last week.

The markets also await reports of the US Energy Department's Energy Information Administration reports due later Thursday.

The Energy Department said Wednesday it expects the December contract to settle at $78 a barrel and the December 2011 contract to settle at $84 as a jump in demand from China helps offset slowing growth in developed countries.

China will likely consume an average of 9.5 million barrels a day next year, up 46 percent from 2002, the department said.

On Wednesday, oil rose on the heels of the stock market as concerns for the European economy and despite a report warning the United States' recovery was slowing down.

New York's main contract, light sweet crude for delivery in October closed at $74.67 dollars a barrel while Brent crude for October gained 43 cents to close at $78.17 a barrel.