Oil prices eased in Asian trade today after surging the day before as investors weighed the effects of China's announcement that it would allow a more flexible yuan currency.
New York's main futures contract, light sweet crude for delivery in July dipped 42 cents to $77.40 a barrel while London's Brent North Sea crude for August delivery was off 45 cents at $78.37.
China's weekend announcement it would "strengthen the flexibility" of the yuan had sent oil prices sharply higher Monday on expectations of higher demand from Chinese consumers.
Analysts had interpreted the Chinese central bank's statement as a sign that Beijing was ready to adjust the dollar peg, which has been in place for two years, and allow the currency to rise.
China has effectively pegged the yuan at about 6.8 to the dollar since mid-2008 to prop up exporters during the world financial crisis.
Analysts today said oil prices retreated on signs that any strengthening of the yuan would be gradual.
"The markets are now digesting the news and it would appear that it's not as significant an initiative by the Chinese as some people had hoped," said Jason Feer, vice president with energy market analysts Argus Media.
"I think it's pretty clear the Chinese aren't going to allow a real float of the renminbi (yuan). Over the past few days it's been a financial story for oil, so there's probably been a bit of a pulling back," he told AFP.
A drop in Asian stocks also weighed down on oil prices as investors took profit from Monday's steep gains.
Tokyo shares eased 0.61 per cent by the break while Hong Kong opened 0.30 per cent lower.
