Oil holds at $112 as high inflation raises concern

Oil prices held near $112 a barrel yesterday as high inflation and uncertainty about the International Energy Agency's emergency stock release plan balanced against a weaker dollar. Comments from European Central Bank chief Jean-Claude Trichet reinforced expectations of an interest rate hike next week, which traders and analysts say could stifle economic activity and energy demand. Concerns lingered that Greece could run into further problems even after Wednesday's initial vote to pass an austerity plan to avert bankruptcy. The Greek parliament approved a detailed austerity and privatisation bills yesterday but longer-term dangers still lurk. "It's not finished for Greece yet; there is a last vote," said Thorbjorn Bak Jensen, an oil analyst at Global Risk Management. "If the system tightens up well, Greece doesn't need a rate rise." Article continues below But crude futures bounced after US jobless data showed a slight drop in claims, although the fall was narrower than expected. ICE Brent crude was 5 cents lower at $112.35 a barrel at 1238 GMT, paring early losses of more than $1, after jumping more than 3 per cent on Wednesday. US crude was at $94.99 a barrel, up 22 cents, after gaining 2 per cent in the previous session. A weaker dollar was also supportive, although the dollar index pared early losses after the inflation data was released.