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Page added on November 27, 2009

US Light oil price trading down on Dubai fears

US Light crude oil futures fell below $74 per barrel in Asia trading on Friday, as concerns about the debt crisis in Dubai, the global economic recovery and oil demand.

On the NYMEX, light, sweet crude oil futures for delivery in January traded at $74.58 a barrel at 0634 GMT, down $3.38 in the Globex electronic session. All trades executed electronically during the US holiday on Thursday will be for trade date Friday.

Sentiment in the oil market has been dented by the Dubai government’s statement Wednesday that it will lead restructuring of the Dubai World conglomerate, Commonwealth Bank of Australia commodities strategist David Moore said. As part of that effort, the Dubai government said it would ask lenders for at least a six-month delay in debt payments. Dubai World has almost $60 billion in liabilities.

Equities markets across Asia were rattled by the Dubai World restructuring, with Hong Kong’s Hang Seng Index down 3.4% at midday. South Korea’s Kospi index also fell more than 3% to hits its lowest intraday level since early November.

“A combination of these effects has certainly taken a toll on the oil price,” Moore said. The Dubai news has halted the dollar’s slide. The euro fell to $1.4922, from $1.5007 at the start of Asian trading, adding to the weight on oil prices.

Oil becomes cheaper for holders of other currencies as the US dollar weakens, and the greenback’s decline against the euro has been a major driver of the increase in crude prices this year.

However, the extent of the decline in commodities and equities markets may have been exaggerated by thin trading as a number of major markets were shut Friday. Among those countries whose markets were closed for a public holiday was Singapore, the major oil trading hub for the Asia-Pacific region.

“In time the economic environment will get better rather than worse. That should limit the extent to which oil prices will be trading lower in the near term”.