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Oil price drops to 2 month low, US dollar up on Dubai debt
Published on November 27, 2009 by oilprices · 1 CommentCrude oil prices fell to their lowest level in nearly to months in trading on Friday as concern over losses stemming from Dubai World’s attempt to reschedule its debt led to gains in the US dollar and declines in equities.
Oil prices also dropped on signs that the pace of fuel demand recovery in the US, the biggest energy-consuming nation, was slowing. The US dollar strengthened against the euro as investors sought the safety of assets perceived as lower risk. US distillate stockpiles, which include heating oil and diesel, were 26 percent above the five-year average, the Energy Department said this week.
“There seems to be anxiety across the markets, commodities and equities, stemming from concerns over Dubai’s possible default on debt,” said Toby Hassall, research analyst with CWA Global Markets Pty in Sydney. “The markets are weighing up the implications of that on the global economic recovery.”
Crude oil futures for January delivery dropped $3.44, or 4.4 percent, to $74.52 a barrel on the NYMEX at 6:11 p.m. Sydney time. Crude oil prices last traded below that level on October 14th, when it sank to an intraday low of $74.40 a barrel. Crude oil futures, which have gained 67 percent this year, are poised for a 2.8 percent decline this week.
There was no floor trading in New York yesterday because of the US Thanksgiving holiday. Electronic trading ended at 1:15 p.m. in New York with no settlement of prices. Electronic trading and today’s shortened floor session will count toward the settlement. All trading will stop at 1:45 p.m. in New York.
The US dollar rose against most of the other main currencies, except the Japanese yen, after Dubai World, the government investment company burdened by $59 billion of liabilities, roiled stock markets around the world by seeking to delay repayment on much of its debt.
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The Dubai situation is very worrying and people are obviously worried about a potential domino effect if Dubai cannot pay off their debt.
This episode has destroyed the confidence between borrowers and lenders and it has also shaken the confidence about the pace of a global economic recovery.