Oil falls from record high on China demand worries

by Matthew Robinson

NEW YORK (Reuters) - Oil fell from a record high over $126 a barrel on Monday as a dip in crude oil imports into No. 2 consumer China stirred concerns high prices were eating into demand.

U.S. crude settled down $1.73 at $124.23 a barrel, off an earlier record high of $126.40 a barrel. London Brent crude settled $2.49 lower at $122.91 a barrel.

China's April crude oil imports decreased against year-ago levels, the first monthly year-on-year decline in 18 months, although analysts said the dip was a one-off adjustment as refiners ran down stocks after unusually high March purchases.

"This looks like a bit of a correction on a vastly overbought market," said Mike Zarembski, senior commodities analyst for optionsXpress. "News that China's imports were down in April was a factor for some of the money to come off the table, but the market is still robust."

Strength in distillates for power generation globally has supported crude in recent weeks, and signs demand could falter helped weaken the energy complex, Zarembski added.

Booming demand in emerging economies such as China and India have sent oil prices up six-fold since 2002, with the weak dollar also drawing a wave of speculators seeking a hedge against inflation over the past eight months.

"We sold off on the Chinese import data, which suggested prices at these levels are weighing on demand. But we've pared those losses," said Eric Wittenauer at AG Edwards. "Time and again, this highly resilient market has sold off only to recover and hit new highs."

Oil has jumped about 13 percent since slipping to $110.53 a barrel on May 1, as investors seized on supply disruptions in the North Sea and Nigeria, as well as demand for distillate fuels such as diesel.