Crude Oil Trades Near $77 After Gaining on Easing Dubai Concern

By Yee Kai Pin

Dec. 1 (Bloomberg) -- Crude oil traded near $77 a barrel after rising yesterday as traders bought back futures contracts amid speculation credit losses in Dubai won’t derail the global economic recovery.

Oil advanced 1.6 percent yesterday after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 56.1, the highest level since August 2008. China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third-largest economy, according to a report today.

“The recovery in oil prices is due to people becoming less concerned about the implications of Dubai World-related issues on the international economy,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The calming of some of those concerns is likely to return the oil price to where it was.”

Crude oil for January delivery was at $77.19 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange at 3:23 p.m. Singapore time. Yesterday, the contract increased $1.23 to settle at $77.28 a barrel. Futures have gained 73 percent this year after losing 54 percent in 2008.

Oil traded near $78 a barrel on Nov. 25 before Dubai World, one of the emirate’s three largest state-linked holding companies, sought to delay payments on its debt and other liabilities. The company has since begun what it described as “constructive” talks with banks to restructure $26 billion, less than half of its $59 billion in obligations.

“The issue over Dubai’s credit risk is probably already priced into the market,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo.

Investment Appeal

Easing concerns over a potential default in Dubai prompted the dollar to fall against higher-yielding currencies, bolstering the investment appeal of commodities including gold.

The U.S. currency was little changed against the euro after slipping to $1.5005 yesterday in New York. The dollar dropped for a fifth month in November, the longest losing streak since December 2004.

“The dollar remains an influence on the oil price,” said Commonwealth Bank’s Moore. “If the dollar’s moving about, then we can still see a bit of interest in the oil market.”

Oil also climbed yesterday after two separate maritime incidents. Somali pirates captured the Greek-owned Maran Centaurus carrying 2 million barrels of crude to the U.S, the second time in a year attackers have seized an oil supertanker. Iran’s navy stopped a British yacht and detained the crew, the U.K. government said.

Oil Stockpiles

Commercially held crude oil inventories in the U.S. probably fell as refineries increased operating rates and imports declined. Stockpiles dropped 850,000 barrels in the week ended Nov. 27, according to the median of estimates from eight analysts in a Bloomberg News poll before an Energy Department report tomorrow.

Stockpiles of distillate, which include heating oil and diesel, are expected to have fallen 350,000 barrels, a third weekly decrease, the survey showed. Gasoline inventories likely rose 900,000 barrels.

“The fundamentals of the crude oil market are neutral or even bearish,” said Emori at Astmax. “There’s a lot of supply available in the market.”

Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $78.35 a barrel, down 12 cents, at 3:25 p.m. in Singapore. Yesterday, the contract rose 1.7 percent to $78.47 barrel, the highest since Nov. 18.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net