Crude oil fell sharply on Wednesday amid fears that China will continue to tighten monetary policy and as the dollar strengthened against major currencies.

US light crude oil for February delivery fell $1.87 to settle at $77.62 a barrel on the New York Mercantile Exchange. Earlier in the session oil fell to a low as $76.96 a barrel. The February contract expired at the end of the session.

Traders were spooked by a press report saying the China Banking Regulatory Commission has asked a number of big Chinese banks to stop issuing new loans for the remainder of January.

Investors were also wary ahead of the Energy Information Administration's report on Thursday, a day later than normal following Monday's holiday. Analysts are predicting a rise in US stockpiles, suggesting that demand remains weak.

Comex gold for February delivery slumped $27.40 to settle at $1,112.60 an ounce. Concern about China tightening lending sparked fears that demand from the region for the yellow metal will suffer.

Copper for March delivery was down 8.7 cents to $3.36 a pound.

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