Oil back above $80 after diving on China rate hike

Oil prices rose above $80 a barrel Wednesday in Asia, clawing back some of the previous session's steep drop that was triggered by China's surprise interest rate hike.

Benchmark oil for November delivery was up 97 cents to $80.46 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

The contract tumbled $3.59 to settle at $79.49 on Tuesday after China raised rates for the first time since 2007 to help tame inflation and cool credit growth.

The move spooked investors and helped shake the two pillars of oil's month-long jump above $80 a barrel - the global stock market rally and the weakening dollar. Asian stock markets were mixed on Wednesday after the Dow Jones industrial average fell 1.5 percent.

"Commodities prices in general have been on a tear over the past six weeks and much of that is due to Chinese consumption," Sander Capital Advisors said. "Not everything can go up forever before ill effects take place."

Oil rebounded despite a report from the American Petroleum Institute late Tuesday that crude inventories rose 2.3 million barrels last week. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 2.1 million barrels. Inventories of gasoline and distillates fell, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

In other Nymex trading in November contracts, heating oil rose 2.28 cents to $2.212 a gallon and gasoline gained 1.63 cents to $2.065 a gallon. Natural gas added 1.5 cents to $3.528 per 1,000 cubic feet.

In London, Brent crude rose 89 cents to $81.99 a barrel on the ICE Futures exchange.