Friday, Nov 27, 2009

 
   By Claire Rangel 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Crude futures are at six-week lows Friday as attempts by Dubai World to reschedule debt reawakened credit woes and shook confidence in the economic recovery.

Light, sweet crude for January delivery recently traded $4.22, or 5.4%, lower at $73.74 a barrel on the New York Mercantile Exchange. It had touched an intraday low of $72.39, a 7% fall, and the lowest level since Oct 12. Brent crude on the ICE futures exchange traded $1.66, or 2.2%, lower at $75.33 a barrel.

Dubai World, the city state's largest corporate entity, late Wednesday asked creditors for a six-month stay on repayment of its debts, causing a massive retreat of investors from riskier and higher-yielding assets, such as gold, equities and oil.

Oil's fall "is all related to the Dubai debacle and global equity markets being lower," said Tim Jennings, of Vantage Trading in New York. "Any hint of an economic meltdown in the Middle East would not be good for the price of energy."

Investors fled to the traditional safe-haven of the dollar causing the greenback to rally against the euro. It strengthened from an intraday low of $1.5017 to recently trade at $1.4897.

In times of recession or unsettling economic conditions, the dollar is viewed as a lower risk asset. When the greenback rises, oil tends to fall as it makes the dollar-denominated commodity more expensive to other currency holders.

"Oil prices could be at the mercy of the renewed financial pessimism till further clarity on the Dubai situation emerges," said Barclays Capital in a research note to investors.

The latest economic jitters could cause a further pullback in prices, dampening recent hopes that an economic recovery would lift flagging oil consumption and draw down massive global stock piles

"We are seeing a continuation of the trend to lower prices," said Jennings, "the market can't depend on projected demand increases."

With the Thanksgiving Day holiday Thursday taking a number of participants away from the markets and some traders extending the holiday into Friday, the lighter trading volume is also leading to exaggerated moves, said analysts.

Part of the retreat in oil was also caused by traders exiting long positions - bets they had placed that oil prices would rise - following a rally in oil prices Wednesday, ahead of the U.S. holiday.

The NYMEX contracts are due to settle one hour earlier Friday at 1:30 p.m., EST.

Front-month December reformulated gasoline blendstock, or RBOB, recently traded 10.8 cents, or 5.4%, lower at $1.8896 a gallon. December heating oil recently traded 9.41 cents, or 4.7%, lower at $1.8960 a gallon.

-By Claire Rangel, Dow Jones Newswires; 212-416-2846; claire.rangel@dowjones.com

(END) Dow Jones Newswires

November 27, 2009 09:19 ET (14:19 GMT)