Oil slips to near $97 a barrel after rally

The price of oil slipped back to near $97 a barrel Friday, interrupting a sustained rally on expectations for increased demand.

By early afternoon in Europe, benchmark U.S. crude for March delivery was down 30 cents to $97.02 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the Nymex contract rose 59 cents to $97.32 a barrel.

A survey of Chinese manufacturing released Thursday indicated a contraction in the sector in January for the first time since July. That dented sentiment across financial markets, as did a sharp drop in currencies in emerging markets.

Oil prices were "tracking heavy losses in the global equity markets," said a note to clients from Myrto Sokou, senior research analyst at Sucden Financial Research in London. "Crude oil prices have been set into a correction lower following the general bearish sentiment."

Despite the dent in sentiment, expectations are that oil demand will hold up thanks to the severe cold spell in parts of the U.S. and higher forecasts for global economic growth.

The deep chill blanketing much of the central and eastern U.S. has reduced stocks of heating oil as homeowners crank up the thermostat and electric utilities burn it to avoid paying for natural gas.

Natural gas has skyrocketed to record prices of more than $100 per 1,000 cubic feet on the spot market in some U.S. regions. The increased demand is also reflected in a less severe rise in prices for natural gas futures.

Brent crude, a benchmark for international oil, was down 83 cents to $106.75 a barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

— Wholesale gasoline lost 1.83 cents to $2.6514 a gallon.

— Heating oil fell 1.74 cents to $2.9736 a gallon.

— Natural gas galloped 24.5 cents to reach $4.975 per 1,000 cubic feet.