Oil rises to near $77 as Dubai debt fears ease

[November 30, 2009]  KUALA LUMPUR, Malaysia (AP) -- Oil prices rebounded to near $77 a barrel Monday in Asia as panic about the global fallout from Dubai's debt problems abated.

Benchmark crude for January delivery was up 52 cents to $76.57 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract 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.

Dubai World has sought a six-month reprieve until May on paying its bills.

But Shum said worries lingered about other countries with similar large debts that could trigger another financial crisis but this is likely to also prompt central banks worldwide to maintain ample liquidity and keep interest rates low.

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

In other Nymex trading, gasoline for December delivery added 1.13 cents to $1.9375 a gallon but natural gas shed 3.8 cents to $5.154 per 1,000 cubic feet.

In London, Brent crude for January delivery gained 57 cents to $77.75 on the ICE Futures exchange.

[Associated Press; By EILEEN NG]

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