Oil rally ends on China news

A four-day rally in oil prices ended Friday as China announced steps to cool its credit boom, raising worries that demand for crude from one of the world's biggest consumers of energy will weaken.

Oil prices followed the stock market lower, with the Dow Jones Industrial Average off over 120 points in morning trading.

Average nationwide retail gasoline prices continued their monthlong slide as well, hitting a new low for the year on Friday.

Benchmark crude for March delivery fell $1.96 to $73.32 a barrel on the New York Mercantile Exchange. The contract added 76 cents to settle at $75.28 on Thursday.

China ordered banks Friday to increase reserves for a second time in a month as leaders worried that a stimulus-driven torrent of lending is fueling a dangerous bubble in stock and real estate prices. They also are concerned that the flood of money surging through the economy is adding to inflation.

China is trying to avoid raising interest rates that might derail a recovery in the world's third-largest economy.

Investors are counting on China and India to push demand -- and prices -- for oil higher, especially given the weak levels of consumption in the U.S., Europe and Japan.

Investors will get more clues about U.S. demand for oil Friday morning as the government releases its weekly inventory report. The report was delayed by two days because of snowstorms that hit Washington this week.

Earlier figures from the American Petroleum Institute showed crude stocks rose 7.2 million barrels last week, pointing to continued weak demand.

And supplies of all products continue to be abundant even with the cold winter.

Peter Beutel of Cameron Hanover said in his report Friday that inventories of distillates used for heating oil and diesel fuel were at their highest levels at the end of January since 1983.

The new national average for retail gasoline prices hit $2.628 per gallon, down 0.8 cents, according to AAA, Wright Express and Oil Price Information Service.

Prices have fallen 12.9 cents in the past month, but remain 67.6 cents higher than year-ago levels.

In other Nymex trading in March contracts, heating oil fell 4.15 cents to $1.9215 a gallon, and gasoline dropped 4.31 cents to $1.8926 a gallon. Natural gas dropped 3.6 cents to $5.36 per 1,000 cubic feet.

In London, Brent crude was down $1.27 at $72.85 on the ICE futures exchange.