Light oil price rises in Asia trading, fears over Dubai debts ease

Light oil prices rebounded to near $77 a barrel in early Asia trading Monday as panic about a global fallout from Dubai’s debt problems ease. Benchmark Light crude oil futues for January delivery rose 63 cents to $76.68 at midday Singapore time in electronic trading on the NYMEX, Light oil prices ended last week’s trading lower and fell $1.91 to settle at $76.05 on Friday.

News that Dubai’s investment arm, Dubai World, could default on $60 billion in debt sent world markets tumbling on Friday as investors fretted about another financial crisis. The United Arab Emirates central bank took steps to avert any run on banks by panicked depositors, pledging Sunday to offer additional money to foreign and domestic banks in the emirates amid concerns that UAE banks have some of the biggest exposure to Dubai World’s debts.

The promise of cheap funds signaled to global investors that the country’s federal government, backed by oil money, will do what it can to limit the fallout from the indebted Dubai emirate.

“Fears about the Dubai World debt default have eased. Asian financial markets have reversed course this morning and with the dollar weakening against the euro, oil is inching up toward $77,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

“The long term prospect for commodities including crude oil looks strong amid expectations that the value of the US dollar will remain weak,” he said, predicting oil to remain within a tight trading range of the mid 70s to the low 80s.

Tags:  Asia, Dubai, light oil price, trading, US dollar