By Christian Schmollinger and Ben Sharples
Nov. 30 (Bloomberg) -- Crude oil rose above $76 a barrel in New York after the United Arab Emirates’ central bank said it would back the country’s lenders from a possible default by Dubai World, easing concerns of an economic slowdown.
Oil gained as much as 1.1 percent today after the Abu Dhabi-based U.A.E. central bank said yesterday financial institutions will be able to borrow using a facility. The dollar declined against the euro, bolstering the attraction of commodities as an alternative investment.
“There is the expectation that Abu Dhabi will step in and do what needs to be done,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “Even so, the amount of capital isn’t really enough to upset the economic resurgence we’ve seen, so it’s really just a chance to buy on the dip.”
Crude oil for January delivery climbed as much as 80 cents to $76.85 a barrel on the New York Mercantile Exchange. Prices were at $76.63 a barrel, up 58 cents, at 3:26 p.m. in Singapore.
The contract declined 2.5 percent to settle at $76.05 a barrel on Nov. 27. Prices have gained 72 percent this year. Oil is set for a monthly decline of 0.4 percent, its first drop in four months.
“The market has run out of steam after spending most the year in an upward trajectory,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “The market is still coming to terms with the implications of the Dubai debt scare for oil.” The move by the U.A.E central bank could be a positive sign, he said.
Dubai World
Markets from Asia to the U.S. fell last week after Dubai World announced Nov. 25 it was seeking to delay loan repayments. Dubai’s stock markets will trade today for the first time since the news.
Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010. That raised the prospects of rising loan losses for U.A.E. and foreign banks.
The dollar traded at $1.5062 per euro at 6:33 a.m. in London, from $1.4988 on Nov. 27. The European currency last week gained 0.9 percent against the greenback, its biggest climb in three weeks.
“Barring any jarring announcements out of Dubai, we’ve already seen any support for the dollar,” said Hudson Capital’s Kornafel. “Unless new news comes out, we’ll see the dollar tick lower and crude tick higher.”
Iran Defiance
Iran announced expansion of its nuclear program in defiance of United Nations demands, a move the Obama administration said will further isolate the Islamic Republic from the international community.
President Mahmoud Ahmadinejad’s Cabinet ordered the Atomic Energy Organization of Iran to begin building 10 uranium enrichment sites within two months, the Islamic Republic News Agency reported. All would be at the same scale as Iran’s Natanz site, producing fuel for power plants to generate 20,000 megawatts of electricity, the state news agency said.
Iran is a member of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil.
Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $77.76 a barrel, up 58 cents, at 3:27 p.m. in Singapore. The contract earlier rose as much as 62 cents, or 0.8 percent, to $77.80 a barrel.
To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
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